UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D. C. 20549

                            FORM 10-K

                FOR ANNUAL AND TRANSITION REPORTS
             PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934
                           (Mark One)

   [X]      Annual Report Pursuant to Section 13 or 15(d) of
               the Securities Exchange Act of 1934
           for the fiscal year ended December 31, 2005

                               OR

   [ ]  Transition Report Pursuant to Section 13 or 15(d)
             of the Securities Exchange Act of 1934
            for the transition period from .. to ...

                 Commission File Number 0-12114

                           CADIZ INC.
       (Exact name of registrant specified in its charter)

                      DELAWARE  77-0313235
   (State or other jurisdiction of           (I.R.S. Employer
   incorporation or organization)          Identification No.)

777 S. Figueroa Street, Suite 4250,Los Angeles, CA    90017
  (Address of principal executive offices)         (Zip Code)

                         (213) 271-1600
      (Registrant's telephone number, including area code)


   Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class          Name of Each Exchange on Which Registered
      None                                       None

   Securities Registered Pursuant to Section 12(g) of the Act:

             COMMON STOCK, PAR VALUE $0.01 PER SHARE
                        (Title of Class)

Indicate by check mark if the Registrant is a well-known seasoned
issuer, as defined in rule 405 under the Securities Act of 1933.

                        YES      NO  X
                            ---     ---

Indicate by a check mark if the Registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act.

                        YES      NO  X
                            ---     ---

Indicate by check mark whether the Registrant:  (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                        YES  X   NO
                            ---     ---

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (220.405 of this chapter)
is not contained herein, and will not be contained to the best of
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
K or any amendment of this Form 10-K. [ ]

Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer  (as defined in Exchange Act Rule 12b-2).

     LARGE ACCELERATED FILER       ACCELERATED FILER  X
                             ---                     ---
                NON-ACCELERATED FILER
                                      ---

                          Page i

Indicate by check mark whether the Registrant is a shell company
(as defined in Exchange Act Rule 12b-2).

                        YES      NO  X
                            ---     ---

As of Feb 28, 2006, the Registrant had 11,330,402 shares of
common stock outstanding. The aggregate market value of the
common stock held by nonaffiliates as of June 30, 2005 was
approximately $86,942,138 based on 4,575,902 shares of common
stock outstanding held by nonaffiliates and the closing price on
that date. Shares of common stock held by each executive officer
and director and by each entity that owns more than 5% of the
outstanding common stock have been excluded in that such persons
may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other
purposes.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement to be
filed for its 2006 Annual Meeting of Stockholders are
incorporated by reference into Part III of this Report.  The
Registrant is not incorporating by reference any other documents
within this Annual Report on Form 10-K except those footnoted in
Part IV under the heading "Item 15. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K".

                          Page ii


TABLE OF CONTENTS


PART I

Item 1.    Business . . . . . . . . . . . . . . . . . . . . . . .1

Item 1A.   Risk Factors. . . . . . . . . . . . . . . . . . . . . 8

Item 1B.   Unresolved Staff Comments. . . . . . . . . . . . . . .9

Item 2.    Properties . . . . . . . . . . . . . . . . . . . . . .9

Item 3.    Legal Proceedings . . . . . . . . . . . . . . . . . .11

Item 4.    Submission of Matters to a Vote of Security Holders. 12


PART II

Item 5.    Market for Registrant's Common Equity and Related
            Stockholder Matters. . . . . . . . . . . . . . . . .13

Item 6.    Selected Financial Data. . . . . . . . . . . . . . . 14

Item 7.    Management's Discussion and Analysis of Financial
            Condition and Results of Operations. . . . . . . . .15

Item 7A.   Quantitative and Qualitative Disclosures about
            Market Risk. . . . . . . . . . . . . . . . . . . . .27

Item 8.    Financial Statements and Supplementary Data. . . . . 27

Item 9.    Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure . . . . . . . . 27

Item 9A.   Controls and Procedures. . . . . . . . . . . . . . . 28

Item 9B.   Other Information. . . . . . . . . . . . . . . . . . 28


PART III

Item 10.  Directors and Executive Officers of the Registrant . .29

Item 11.  Executive Compensation. . . . . . . . . . . . . . . . 29

Item 12.  Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters . . . . . 29

Item 13.  Certain Relationships and Related Transactions. . . . 29

Item 14.  Principal Accountant Fees and Services. . . . . . . . 29


PART IV

Item 15.  Exhibits and Financial Statement Schedules . . . . . .30

                          Page iii



PART I

ITEM 1.   BUSINESS

     This Form 10-K presents forward-looking statements with
regard to financial projections, proposed transactions such as
those concerning the further development of our land and water
assets, information or expectations about our business
strategies, results of operations, products or markets, or
otherwise makes statements about future events.  Such forward-
looking statements can be identified by the use of words such as
"intends", "anticipates", "believes", "estimates", "projects",
"forecasts", "expects", "plans" and "proposes".  Although we
believe that the expectations reflected in these forward-looking
statements are based on reasonable assumptions, there are a
number of risks and uncertainties that could cause actual results
to differ materially from these forward-looking statements.
These include, among others, the cautionary statements under the
caption "Risk Factors", as well as other cautionary language
contained in this Form 10-K.  These cautionary statements
identify important factors that could cause actual results to
differ materially from those described in the forward-looking
statements.  When considering forward-looking statements in this
Form 10-K, you should keep in mind the cautionary statements
described above.

OVERVIEW

     Our primary asset consists of three blocks of land in
eastern San Bernardino County, California totaling approximately
46,000 acres.  Virtually all of this land is underlain by high-
quality groundwater resources with demonstrated potential for
various applications, including water storage and supply programs
and recreational, residential, and agricultural development.  Two
of the three properties are located in proximity to the Colorado
River Aqueduct, the major source of imported water for southern
California.  The third property is located near the Colorado
River.

     The value of these assets derives from a combination of
projected population increases and limited water supplies
throughout southern California.  In addition, most of the major
population centers in southern California are not located where
significant precipitation occurs, requiring the importation of
water from other parts of the state.  We therefore believe that a
competitive advantage exists for companies that can provide high
quality, reliable, and affordable water to major population
centers.

     To this end, in 1997 we commenced discussions with the
Metropolitan Water District of Southern California
("Metropolitan") in order to develop a long-term agreement for a
joint venture groundwater storage and supply program on our land
in the Cadiz and Fenner valleys of eastern San Bernardino County
(the "Cadiz Project").  Under the Cadiz Project, surplus water
from the Colorado River would be stored in the aquifer system
underlying our land during wet years.  When needed, the stored
water, together with indigenous groundwater, could be returned to
the Colorado River Aqueduct for distribution to Metropolitan's
member agencies throughout six southern California counties.

     Between 1997 and 2002, Metropolitan and the Company received
substantially all of the various permits required to construct
and operate the project, including a federal Record of Decision
from the U.S. Department of Interior, which endorsed the Cadiz
Project and granted a right-of-way for construction of project
facilities.  The federal government also approved a Final

                          Page 1

Environmental Impact Statement ("FEIS") in compliance with the
National Environmental Policy Act ("NEPA").

     Despite the significant progress made in the federal
environmental review process, in October 2002 Metropolitan's
Board refused to consider whether or not to certify the Final
Environmental Impact Report ("FEIR"), which was a necessary
action to authorize implementation of the Cadiz Project in
accordance with the California Environmental Quality Act
("CEQA").

     Regardless of the Metropolitan Board's actions in October
2002, Southern California's need for water storage and supply
programs has not abated. Therefore we continue to pursue the
completion of the environmental review process for the Cadiz
Project. To that end we are now in advanced discussions with a
third party public agency that would assume the role of CEQA lead
agency and complete the state of California environmental review
process.  We are also working directly with the U.S. Department
of Interior to have the permits that were approved during the
federal environmental review process, including the right-of-way
granted in the Record of Decision, issued directly to the
Company.  Additionally, we are in discussions with several other
public agencies regarding their interest in participating in the
Cadiz Project. All of these agencies have access to independent
sources of supply that can be stored by the Cadiz Project. See
"Water Resource Development", below.

     Due to significant population growth in Southern California,
where our properties are located, we have also begun to explore
additional uses of our land assets. To this end, we have retained
outside services to conduct a detailed analysis of our land
assets and assess the opportunities for these properties.

     We expect that these objectives will have different capital
requirements and implementation periods than those previously
established.  Therefore, in 2002, we entered into a series of
agreements with our senior secured lender, ING Capital LLC
("ING") pursuant to which we reduced our debt to ING to $25
million and extended the maturity date of the ING debt until
March 31, 2010, conditioned upon a further principal reduction of
$10 million on or before March 31, 2008.  In addition, we raised
approximately $35 million in equity through private placements
completed in 2003 and 2004.

     Further, in February 2005, our wholly owned subsidiary Sun
World International, Inc. ("Sun World") completed the sale of
substantially all of its assets, and Sun World's consensual plan
of reorganization was confirmed by the U.S. Bankruptcy Court in
August 2005.  Sun World had entered bankruptcy proceedings on
January 30, 2003, following which the financial statements of Sun
World are no longer consolidated with ours.

     With the implementation of these steps, we have been able to
retain ownership of all of our land assets and assets relating to
our water programs and also to obtain working capital needed to
continue our efforts to develop our water programs.  Because many
of our pre-existing common stockholders have participated in the
2003 and 2004 private placements, our base of common stockholders
remains largely the same as before these placements.

     We remain committed to our land and water assets and we continue
to explore all opportunities for development of these assets.  We
cannot predict with certainty which of these various
opportunities will ultimately be utilized.

                          Page 2

(A)  GENERAL DEVELOPMENT OF BUSINESS
     -------------------------------

     We are a Delaware corporation formed in 1992 to act as the
surviving corporation in a Delaware reincorporation merger
between us and our predecessor, Pacific Agricultural Holdings,
Inc., a California corporation formed in 1983.

     As part of our historical business strategy, we have
conducted our land acquisition, water development activities,
agricultural operations and search for international water and
agricultural opportunities for the purpose of enhancing the long-
term appreciation of our properties and future prospects.  See
"Narrative Description of Business" below.

     The focus of our water development activities has been the
Cadiz Project. The Metropolitan Board's decision in late 2002
delayed implementation of the Cadiz Project as we sought a
settlement with Metropolitan before proceeding with another state
agency. In 2005, our business development activities consisted
largely of continued adjustments to our capital structure by way
of amendments to our lending agreements and equity issuances.
See "Overview", above.  Our primary goal in this process has been
to maintain ownership of our San Bernardino County properties and
to create a capital structure that would allow us to continue the
development of the Cadiz Project.  We believe that we have
succeeded in achieving this goal.  We have obtained an additional
equity infusion of approximately $35 million through the issuance
of common stock.  We have paid down our debt facility with ING to
$26 million, and have obtained a maturity date extension and
interest rate reduction with respect to such debt.  We have also
divested all of the assets and operations of Sun World.  Sun
World's Chapter 11 Reorganization Plan ("Plan") is effective, and
the Company has no further liabilities related to the business or
operations of Sun World. These transactions are described in more
detail in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operation."

(B)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
     ---------------------------------------------

     During the year ended December 31, 2005 we continued to
develop the water resource segment of our business.  With the
deconsolidation of Sun World upon Sun World's January 30, 2003
bankruptcy filing our agricultural operations are confined to
limited farming activities at the Cadiz Valley property. We no
longer actively operate a separate agricultural resources
segment.  See Consolidated Financial Statements.  See also Item
7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations".

(C)  NARRATIVE DESCRIPTION OF BUSINESS
     ---------------------------------

     Our business strategy is the development of our holdings for
their highest and best uses.  At present, our development
activities are focused on water resource and real  estate
development at our San Bernardino County properties.

WATER RESOURCE DEVELOPMENT

     Our portfolio of water resources, located in proximity to
the Colorado River and the Colorado River Aqueduct, the principal
source of imported water for Southern California,

                          Page 3

provides us with the opportunity to participate in a variety of
water storage and supply programs, exchanges and conservation
programs with public agencies and other partners.

     CADIZ GROUNDWATER STORAGE AND DRY-YEAR SUPPLY PROGRAM
     -----------------------------------------------------

     We own approximately 35,000 acres of land and related high-
quality groundwater resources in the Cadiz and Fenner valleys of
eastern San Bernardino County.  The aquifer system underlying
this property is naturally recharged by precipitation (both rain
and snow) within a watershed of approximately 1,300 square miles.
See Item 2, "Properties - The Cadiz/Fenner Property".

     In 1997 we commenced discussions with Metropolitan in order
to develop principles and terms for a long-term agreement for a
joint venture groundwater storage and supply program on this land
(the "Cadiz Project").  The Cadiz Project would have provided
Southern Californians with a valuable increase in water supply
during periods of drought or other emergencies.  During wet
years, surplus water from the Colorado River would be stored in
the aquifer system that underlies the Cadiz property.  When
needed, the stored water and indigenous groundwater would be
returned to the Colorado River Aqueduct for distribution to water
agencies throughout six southern California counties.  The
Colorado River Aqueduct provides supplemental water to
approximately 18 million people.  Additionally, exchange
agreements could be used to transfer this supplemental water
supply to California communities in the Central and Northern
portions of the state.

     Temporary withdrawals of indigenous groundwater would also
be available from the Cadiz Project during emergencies.  Any
temporary withdrawals would be strictly monitored according to
the provisions of the Groundwater Monitoring & Management Plan
("Management Plan") approved by the U.S. Department of the
Interior in its 2002 Record of Decision.  The comprehensive
Management Plan was created during the Cadiz Project's extensive
environmental review process to ensure long-term protection of
the aquifer system and related environmental resources in and
surrounding the area in which the Cadiz Project is located.

   Cadiz Project facilities would include, among other things:

       *  Spreading basins, which are shallow ponds that
          percolate water from the ground surface to the water
          table;

       *  High yield extraction wells designed to extract stored
          Colorado  River water and indigenous groundwater from
          beneath the Cadiz Project area;

       *  A 35-mile conveyance pipeline to connect the spreading
          basins and wellfield to the Colorado River Aqueduct
          near the Iron Mountain pumping plant; and

       *  A pumping plant to pump water through the conveyance
          pipeline  from the Colorado River Aqueduct near the Iron
          Mountain pumping plant to the Cadiz Project spreading
          basins.

     The cost of these facilities was estimated to be
approximately $150 million in 2002 and is expected to be higher
today due to steel price increases and higher well drilling
costs.

                          Page 4

     In October 2001, the Final Environmental Impact Statement
("FEIS") and Final Environmental Impact Report ("FEIR") were
issued by Metropolitan and the U.S. Bureau of Land Management, in
collaboration with the U.S. Geological Survey and the National
Park Service.  On August 29, 2002, the U.S. Department of
Interior approved the FEIS for the Cadiz Project and issued its
Record of Decision, the final step in the federal environmental
review process for the Cadiz Project.  The Record of Decision
amended the California Desert Conservation Area Plan for an
exception to the utility corridor element and offered to
Metropolitan a right-of-way grant necessary for the construction
and operation of the Cadiz Project.

     With all federal approvals and permits in place, on October
8, 2002, Metropolitan's Board considered acceptance of the terms
and conditions of the right-of-way grant pursuant to the
published Record of Decision. The Board voted not to adopt
Metropolitan staff's recommendation to approve the terms and
conditions of the right-of-way grant issued by the Department of
the Interior for the Cadiz Project by a very narrow margin.
Instead, the Board voted for an alternative motion to reject the
terms and conditions of the right-of-way grant and to not proceed
with the Cadiz Project.  Subsequent to the Metropolitan Boards'
actions, negotiations toward a final agreement for the Cadiz
Project on the basis of the previously approved definitive
economic terms ceased.

     When Metropolitan's Board declined to proceed with the Cadiz
Project, the FEIR was complete and awaiting certification at a
hearing scheduled for late October 2002.  It is our position that
Metropolitan's actions on October 8, 2002 breached various
contractual and fiduciary obligations of Metropolitan to us, and
interfered with the economic advantage we would have obtained
from the Cadiz Project.  Therefore, in April 2003 we filed a
claim against Metropolitan seeking compensatory and punitive
damages.  When settlement negotiations failed to produce a
resolution, we filed a lawsuit against Metropolitan in Los
Angeles Superior Court on November 17, 2005. See Item 3 - "Legal
Proceedings".

     Meanwhile, the need for new water storage and supply
programs in the southwestern United States has not diminished.
Over the five years preceding the 2004 - 2005 winter season, the
Colorado River watershed experienced a prolonged drought that
presented major challenges to the economies of California,
Nevada, and Arizona. The drought was followed by a wet year in
2005 during which surplus water was available to Metropolitan
that exceeded its storage capacity by approximately 200,000 acre-
feet.  Had the Cadiz Project been built, it could have
accommodated most of this available surplus.  As population
continues to grow at record rates, the Southwest is facing the
very real possibility that current and future supplies of water
will not be able to meet demand without more investment in water
infrastructure, including groundwater storage projects.

     To meet this need, we are committed to completing the Cadiz
Project and finalizing the state of California environmental
review. To that end we are now in advanced discussions with a
third party public agency that would assume the role of CEQA lead
agency and complete the California environmental review process.
We are also working directly with the U.S. Department of Interior
to have the permits that were granted during the federal
environmental review process, including the right-of-way granted
in the Record of Decision, issued directly to the Company.
Additionally, we are in discussions with several other public
agencies regarding their interest in participating in the Cadiz
Project. All of these agencies have access to independent sources
of supply that can be stored by the Cadiz Project.

                          Page 5

     OTHER EASTERN MOJAVE PROPERTIES
     -------------------------------

     Our second largest landholding is approximately 9,000 acres
in the Piute Valley of eastern San Bernardino County.  This
landholding is located approximately 15 miles from the resort
community of Laughlin, Nevada, and about 12 miles from the
Colorado River town of Needles, California.  Extensive
hydrological studies, including the drilling and testing of a
full-scale production well, have demonstrated that this
landholding is underlain by high-quality groundwater. The aquifer
system underlying this property is naturally recharged by
precipitation (both rain and snow) within a watershed of
approximately 975 square miles.  Discussions with potential
partners have commenced with the objective of developing our
Piute Valley assets.

     Additionally, we own additional acreage located near Danby
Dry Lake, approximately 30 miles southeast of our landholdings in
Cadiz and Fenner valleys.  Our Danby Lake property is located
approximately 10 miles north of the Colorado River Aqueduct.
Initial hydrological studies indicate that it has excellent
potential for a groundwater storage and supply project.

AGRICULTURAL OPERATIONS

     With the bankruptcy of Sun World, our agricultural
operations are very limited.  Historically, we have leased our
Cadiz Valley farming property to Sun World and other third
parties. In the fourth quarter of 2004, the lease with Sun World
expired. We continue to lease to a third party approximately 160
acres of table grape vineyards at our Cadiz Valley property.  The
lease is renewable on a year to year basis with annual revenues
of approximately $50,000.  In 2005 we also farmed 240 acres of
Lisbon lemons and 20 acres of Eureka lemons.  We subcontracted
the labor and marketing of the crop to third parties.  Annual
revenues were approximately $1.1 million.

     On January 30, 2003, Sun World filed voluntary petitions
under Chapter 11 of the Bankruptcy Code. In February 2005, with
Bankruptcy Court approval, Sun World sold substantially all of
its assets and in September 2005 the Chapter 11 Reorganization
Plan became effective. See "General Development of Business",
above.  Following the filing date and until the sale of its
assets, Sun World operated its business and managed its affairs
as debtor and debtor in possession.  As of the filing date the
financial statements of Sun World are no longer consolidated with
those of ours, but instead, we account for our investment in Sun
World on the cost basis of accounting.  As a result of changing
to the cost basis of accounting on January 31, 2003, we had a net
investment in Sun World of approximately $195,000 consisting of
loans and other amounts due from Sun World of $13,500,000 less
losses in excess of investment in Sun World of $13,305,000.  We
wrote off the net investment in Sun World of $195,000 at the
Chapter 11 filing date because we do not anticipate being able to
recover our investment.

     On August 26, 2005, the U.S. Bankruptcy Court confirmed Sun
World's amended plan of reorganization, which included a
settlement agreement between Sun World and Cadiz regarding the
retention of certain Sun World net operating loss carryforwards
by Cadiz and released Cadiz from all liabilities under the
guarantees of First Mortgage Notes issued by Sun World.  The
amended Plan became effective on September 6, 2005, and Cadiz has
no further interest in the business and operations of Sun World.

                          Page 6

SEASONALITY

     Our water resource development activities are not seasonal
in nature.

     With our divestiture of Sun World our remaining farming
operations are limited. These operations will be subject to the
general seasonal trends that are characteristic of the
agricultural industry.

COMPETITION

     We face competition for the acquisition, development and
sale of our properties from a number of competitors.  We may also
face competition in the development of water resources associated
with our properties.  Since California has scarce water resources
and an increasing demand for available water, we believe that
location, price and reliability of delivery are the principal
competitive factors affecting transfers of water in California.

EMPLOYEES

     As of December 31, 2005, we employed 8 full-time employees
(i.e. those individuals working more than 1,000 hours per year).
We believe that our employee relations are good.

REGULATION

     Our operations are subject to varying degrees of federal,
state and local laws and regulations.  As we proceed with the
development of our properties, including the Cadiz Project, we
will be required to satisfy various regulatory authorities that
we are in compliance with the laws, regulations and policies
enforced by such authorities.  Groundwater development, and the
export of surplus groundwater for sale to single entities such as
public water agencies, is not subject to regulation by existing
statutes other than general environmental statutes applicable to
all development projects.  Additionally, we must obtain a variety
of approvals and permits from state and federal governments with
respect to issues that may include environmental issues, issues
related to special status species, issues related to the public
trust, and others.  Because of the discretionary nature of these
approvals and concerns which may be raised by various
governmental officials, public interest groups and other
interested parties during both the development and approval
process, our ability to develop properties and realize income
from our projects, including the Cadiz Project, could be delayed,
reduced or eliminated.

ACCESS TO OUR INFORMATION

     We are subject to the information and reporting requirements
of the Securities Exchange Act and file annual, quarterly and
current reports, proxy statements and other information with the
 SEC.  You can request copies of these documents, for a copying
fee, by writing to the SEC.  We furnish our stockholders with
annual reports containing financial statements audited by our
independent auditors.

     We also make available on our website www.cadizinc.com
copies of our annual, quarterly and special reports, proxy and
information statements and other information.

                          Page 7

ITEM 1A.  RISK FACTORS

     Our business is subject to a number of risks, including
those described below.

OUR DEVELOPMENT ACTIVITIES HAVE NOT GENERATED SIGNIFICANT
REVENUES

     At present, our development activities are focused on water
resource development at our San Bernardino County properties.  We
have not received significant revenues from our development
activities to date and we do not know when, if ever, we will
receive operating revenues from our development activities.  As a
result, we continue to incur a net loss from operations.

WE MAY NEVER GENERATE SIGNIFICANT REVENUES OR BECOME PROFITABLE
UNLESS WE ARE ABLE TO SUCCESSFULLY IMPLEMENT PROGRAMS TO DEVELOP
OUR LAND ASSETS AND RELATED WATER RESOURCES

     We do not know the terms, if any, upon which we may be able
to proceed with our water development programs.  Regardless of
the form of our water development programs, the circumstances
under which transfers or storage of water can be made and the
profitability of any transfers or storage are subject to
significant uncertainties, including hydrologic risks of variable
water supplies, risks presented by allocations of water under
existing and prospective priorities, and risks of adverse changes
to or interpretations of U.S. federal, state and local laws,
regulations and policies.  Additional risks attendant to such
programs include our ability to obtain all necessary regulatory
approvals and permits, possible litigation by environmental or
other groups, unforeseen technical difficulties, general market
conditions for water supplies, and the time gap needed to
generate significant operating revenues from such programs after
operations commence.

OUR FAILURE TO MAKE TIMELY PAYMENTS OF PRINCIPAL AND INTEREST ON
OUR INDEBTEDNESS MAY RESULT IN A FORECLOSURE ON OUR ASSETS

     As of December 31, 2005, we had indebtedness outstanding to
our senior secured lender of approximately $25.9 million.  Our
assets have been put up as collateral to secure the payment of
this debt.  If we cannot generate sufficient cash flow to make
timely payments of principal and interest on this indebtedness,
or if we otherwise fail to comply with the terms of agreements
governing our indebtedness, we may default on our obligations.
If we default on our obligations, our lenders may sell off the
assets that we have put up as collateral.  This, in turn, would
result in a cessation or sale of our operations.

THE ISSUANCE OF SHARES UNDER OUR MANAGEMENT EQUITY INCENTIVE PLAN
WILL IMPACT EARNINGS

     Under applicable accounting rules, the issuance of shares
and options under our Management Incentive Equity Plan will
result in a charge to earnings based on the value of our common
stock at the time of issue and the valuation of options at the
time of their award and will be recorded over the vesting period
in proportion to the quantities vested.  Our Management Equity
Incentive Plan provides for the issuance of up to 1,472,051
shares of common stock.  Subsequent to January 1, 2005 we have
issued stock or options to purchase stock representing 1,459,712
of the shares authorized for issuance under this Management
Equity Incentive Plan.

                          Page 8

Based on the trading price of our common stock at the time of such
issuances, such issuances resulted in a charge to our earnings of
$16.7 million for our fiscal year ended December 31, 2005 and will
result in a further significant charge to our earnings for our fiscal
year ended December 31, 2006.  The cost of approximately 93% of the
shares and options issued in our fiscal year ended December 31, 2005
was an expense during 2005.

WE MAY NOT BE ABLE TO OBTAIN THE FINANCING WE NEED TO IMPLEMENT
OUR ASSET DEVELOPMENT PROGRAMS

     We will require additional capital to finance our operations
until such time as our asset development operations produce
revenues. We cannot assure you that our current lenders, or any
other lenders, will give us additional credit should we seek it.
If we are unable to obtain additional credit, we may engage in
further equity financings.  Our ability to obtain equity
financing will depend, among other things, on the status of our
asset development programs and general conditions in the capital
markets at the time funding is sought.  Any further equity
financings would result in the dilution of ownership interests of
our current stockholders.

WE ARE RESTRICTED BY CONTRACT FROM PAYING DIVIDENDS AND WE DO NOT
INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE

     Any return on investment on our common stock will depend
primarily upon the appreciation in the price of our common stock.
To date, we have never paid a cash dividend on our common stock.
The loan documents governing our credit facilities with our
senior secured lender prohibit the payment of dividends while
such facilities are outstanding.  As we have a history of
operating losses, we have been unable to date to pay dividends.
Even if we post a profit in future years, we currently intend to
retain all future earnings for the operation of our business.  As
a result, we do not anticipate that we will declare any dividends
in the foreseeable future.


ITEM 1B.  UNRESOLVED STAFF COMMENTS

     Not applicable at this time.


ITEM 2.   PROPERTIES

The following is a description of our significant properties.

THE CADIZ/FENNER PROPERTY

     In 1984, we conducted investigations of the feasibility of
agricultural development of land located in the Cadiz and Fenner
valleys of eastern San Bernardino County, California.  These
investigations confirmed the availability of high-quality water
in commercial quantities appropriate for agricultural
development.  Since 1985, we have acquired approximately 35,000
acres of largely contiguous land in this area, which is located
approximately 30 miles north of the Colorado River Aqueduct.

                          Page 9

     Additional independent geotechnical and engineering studies
conducted since 1985 have confirmed that the Cadiz/Fenner
property overlies a natural groundwater aquifer system that is
ideally suited for the underground water storage and dry year
transfers as contemplated in the Cadiz Project.  See Item 1,
"Business - Narrative Description of Business - Water Resource
Development".

     In November 1993, the San Bernardino County Board of
Supervisors unanimously approved a General Plan Amendment
establishing an agricultural land use designation for 9,600 acres
in the Cadiz Valley for which approximately 1,600 acres have been
developed for agriculture.  This action also approved permits to
construct infrastructure and facilities to house as many as 1,150
seasonal workers and 170 permanent residents (employees and their
families) and allows for the withdrawal of more than 1,000,000
acre-feet of groundwater from the aquifer system underlying our
property.

OTHER EASTERN MOJAVE PROPERTIES

     We also own approximately 10,900 additional acres in the
eastern Mojave Desert, including the Piute and Danby Lake
properties.

     Our second largest property consists of approximately 9,000
acres in the Piute Valley of eastern San Bernardino County.  This
landholding is located approximately 15 miles from the resort
community of Laughlin, Nevada, and about 12 miles from the
Colorado River town of Needles, California.  Extensive
hydrological studies, including the drilling and testing of a
full-scale production well, have demonstrated that this
landholding is underlain by high-quality groundwater.  The
aquifer system underlying this property is naturally recharged by
precipitation (both rain and snow) within a watershed of
approximately 975 square miles.  Discussions with potential
partners have commenced with the objective of developing our
Piute Valley assets.

     Additionally, we own or control additional acreage located
near Danby Dry Lake, approximately 30 miles southeast of our
landholdings in the Cadiz and Fenner valleys.  Our Danby Lake
property is located approximately 10 miles north of the Colorado
River Aqueduct.  Initial hydrological studies indicate that it
has excellent potential for a groundwater storage and supply
project.

FARM PROPERTY

     Approximately 1,600 acres of our Cadiz Valley property has
been developed for agricultural use.  We are currently leasing to
a third party approximately 160 acres of this property,
consisting of table grape vineyards, and until the fourth quarter
of 2004 were leasing approximately 750 acres of this property,
consisting of juice grape vineyards and citrus orchards, to Sun
World.  The leases provide for the lessees to be responsible for
all costs associated with growing crops on the leased property.
The lease with the third party is renewable on a year to year
basis with annual revenues of approximately $50,000.  In 2005 the
Company farmed the citrus orchard and subcontracted the labor and
marketing of the crop.  Annual revenues from these activities
were approximately $1.1 million.

                          Page 10

EXECUTIVE OFFICES

     We currently lease our executive offices in Los Angeles,
California, which consist of approximately 4,770 square feet,
pursuant to a sublease that expires on June 14, 2006. Current
base rent under the lease is approximately $8,350 per month.

CADIZ REAL ESTATE

     In December 2003, we transferred substantially all of our
assets (with the exception of our office sublease, certain office
furniture and equipment and any Sun World related assets) to
Cadiz Real Estate LLC, a Delaware limited liability company
("Cadiz Real Estate").  We hold 100% of the equity interests of
Cadiz Real Estate, and therefore we continue to hold 100%
beneficial ownership of the properties that we transferred to
Cadiz Real Estate.  Cadiz Real Estate was created at the behest
of our senior secured lender, ING.  The Board of Managers of
Cadiz Real Estate consists of two managers appointed by us and
one independent manager named by ING.

     Cadiz Real Estate is a co-obligor under our credit
facilities with ING, for which assets of Cadiz Real Estate have
been pledged as security.

     Because the transfer of our properties to Cadiz Real Estate
has no effect on our ultimate beneficial ownership of these
properties, we refer throughout this Report to properties owned
of record either by Cadiz Real Estate or by us as "our"
properties.

DEBT SECURED BY PROPERTIES

     Our outstanding debt at December 31, 2005 of $25.9 million
represents loans secured by our properties (including properties
held of record by Cadiz Real Estate).  Information regarding
interest rates and principal maturities is provided in Note 6 to
the consolidated financial statements.


ITEM 3.   LEGAL PROCEEDINGS

CLAIM AGAINST METROPOLITAN

     On April 7, 2003 we filed an administrative claim against
The Metropolitan Water District of Southern California
("Metropolitan"), asserting the breach by Metropolitan of various
obligations specified in our 1998 Principles of Agreement with
Metropolitan.  We believe that by failing to complete the
environmental review process for the Cadiz Project, as specified
in the Principles of Agreement, Metropolitan violated this
contract, breached its fiduciary duties to us and interfered with
our prospective economic advantages.  See Item 1, "Business -
Narrative Description of Business - Water Resource Development".
The filing was made with the Executive Secretary of Metropolitan.

     When settlement negotiations failed to produce a resolution,
we filed a lawsuit against Metropolitan in the Los Angeles
Superior Court on November 17, 2005. We are seeking recovery of
compensatory and punitive damages.  Metropolitan has not to date
responded to the litigation.

                          Page 11

SUN WORLD BANKRUPTCY FILING

     On January 30, 2003, (the "Petition Date") Sun World and
three of its wholly owned subsidiaries (Sun Desert, Inc.,
Coachella Growers and Sun World/Rayo) filed voluntary petitions
under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court, Central District of California, Riverside
Division (Case Nos: RS 03-11370 DN, RS 03-11369 DN, RS 03-11371
DN, RS 03-11374 DN).  Sun World's consensual plan of
reorganization was confirmed by the Court in August 2005 and
became effective in September, 2005.  See Item 1, "Business -
General Development of Business".

OTHER PROCEEDINGS

     There are no other material pending legal proceedings to
which we are a party or of which any of our property is the
subject.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of our stockholders
during the fourth quarter of 2005.
PART II

                          Page 12


ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS

     The Company's common stock is currently traded on The NASDAQ
National Market ("NASDAQ") under the symbol "CDZI."  Prior to
June 20, 2005, the Company common stock was traded over the
counter on the OTC Bulletin Board.  Prior to March 27, 2003, the
Company's common stock was listed on NASDAQ. On March 27, 2003,
the Company's common stock was de-listed from NASDAQ and
thereafter traded on the OTC Bulletin Board until May 23, 2003,
at which time our common stock was removed from the Bulletin
Board and began trading on the OTC U.S. Market, often referred to
as the "Pink Sheets". On November 11, 2004 our stock resumed
trading on the OTC Bulletin Board. The following table reflects
actual sales transactions for the dates that the Company was
trading on NASDAQ, and high and low bid information otherwise.
The OTC Bulletin Board and Pink Sheet market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
The high and low ranges of the common stock for the dates
indicated have been provided by Bloomberg LP.

                                   HIGH        LOW
     QUARTER ENDED             SALES PRICE  SALES PRICE
     -------------             -----------  -----------
     2004:
       March 31                    $  7.60    $  4.80
       June 30                     $  8.75    $  7.10
       September 30                $ 15.50    $  8.50
       December 31                 $ 17.00    $ 11.70

     2005:
       March 31                    $ 15.40    $ 11.50
       June 30                     $ 19.00    $ 14.25
       September 30                $ 19.50    $ 16.00
       December 31                 $ 22.00    $ 18.00


     On February 28, 2006, the high, low and last sales prices
for the shares, as reported by Bloomberg, were $18.48, $16.55,
and $18.37, respectively.

     We also have an authorized class of 100,000 shares of
preferred stock. There is one series of preferred stock (Series
F) authorized for issuance. All 100,000 authorized shares of
Series F Preferred Stock were issued in December 2003. Effective
November 30, 2004, 99,000 shares of Series F Preferred Stock were
converted to 1,711,665 shares of our common stock leaving 1,000
shares of Series F Preferred Stock issued and outstanding.

     As of February 28, 2006, the number of stockholders of
record of our common stock was 214 and the estimated number of
beneficial owners was approximately 1,480.

     To date, we have not paid a cash dividend on our common
stock and we do not anticipate paying any cash dividends in the
foreseeable future. Our ability to pay such dividends is subject
to covenants pursuant to agreements with our primary lender that
prohibits the payment of dividends.

                          Page 13

     All securities sold by us during the three years ended
December 31, 2005 which were not registered under the Securities
Act have previously been reported in our Annual, Quarterly, and
Current Reports on Forms 10K, 10-Q and 8K.


ITEM 6.   SELECTED FINANCIAL DATA

    The following selected financial data insofar as it relates
to the years ended December 31, 2005, 2004, 2003, 2002 and 2001
has been derived from our audited financial statements. The
information that follows should be read in conjunction with the
audited consolidated financial statements and notes thereto for
each of the three years in the period ended December 31, 2005
included in Part IV of this Form 10-K. See also Item 7,
"Management's Discussion and Analysis of Financial Condition and
Results of Operations".

($ in thousands, except for per share data)

                                         YEAR ENDED DECEMBER 31,
                              --------------------------------------------
                              2005      2004      2003      2002      2001
                              ----      ----      ----      ----      ----
Statement of Operations Data:

 Total revenues             $  1,197  $     47  $  3,162  $114,250  $ 92,402
 Net loss                    (23,025)  (16,037)  (11,536)  (22,225)  (25,722)
 Less: Preferred stock
        dividends                  -         -       918     1,125       591
       Imputed dividend on
        preferred stock            -         -     1,600       984       441
                            --------  --------  --------  --------  --------
 Net loss applicable to
  common stock              $(23,025) $(16,037) $(14,054) $(24,334) $(26,754)
                            ========  ========  ========  ========  ========
Per share:

 Net loss (basic and
  diluted)                  $  (2.14) $  (2.32) $  (6.39) $ (16.76) $ (18.66)
                            ========  ========  ========  ========  ========
Weighted-average common
 shares outstanding           10,756     6,911     2,200     1,452     1,434
                            ========  ========  ========  ========  ========


                                             DECEMBER 31,
                            ------------------------------------------------
                            2005       2004       2003       2002       2001
                            ----       ----       ----       ----       ----
Balance Sheet Data:

 Total assets             $  46,046  $  51,071  $  49,526  $ 191,883  $ 198,275
 Long-term debt           $  25,883  $  25,000  $  30,253  $ 115,447  $ 141,429
 Redeemable preferred
   stock                  $       -  $       -  $       -  $  10,942  $   9,958
 Preferred stock, common
  stock and additional
  paid-in capital         $ 226,738  $ 209,718  $ 185,040  $ 156,166  $ 152,765
 Accumulated deficit      $(207,885) $(184,860) $(168,823) $(157,287) $(135,062)
 Stockholders' equity
  (deficit)               $  18,967  $  24,858  $  16,217  $  (1,121) $  17,703

                          Page 14

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

     In connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the following
discussion contains trend analysis and other forward-looking
statements.  Forward-looking statements can be identified by the
use of words such as "intends", "anticipates", "believes",
"estimates", "projects", "forecasts", "expects", "plans" and
"proposes".  Although we believe that the expectations reflected
in these forward-looking statements are based on reasonable
assumptions, there are a number of risks and uncertainties that
could cause actual results to differ materially from these
forward-looking statements.  These include, among others, our
ability to maximize value from our Cadiz, California land and
water resources and our ability to obtain new financings as
needed to meet our ongoing working capital needs.  See additional
discussion under the heading "Risk Factors" above.

OVERVIEW

      As discussed in further detail below, as of January 30,
2003 the financial statements of our Sun World subsidiary are no
longer being consolidated with ours.  Presently, our operations
(and, accordingly, our working capital requirements) relate
primarily to our water development activities and, more
specifically, to the Cadiz Groundwater Storage and Dry-Year
Supply Program ("Cadiz Project").  Our results of operations for
periods subsequent to January 2003 have been, and in future
fiscal periods will be, largely reflective of the operations of
our water development activities.

     In 1997 we commenced discussions with the Metropolitan Water
District of Southern California ("Metropolitan") in order to
develop a long-term agreement for a joint venture groundwater
storage and supply program on our land in the Cadiz and Fenner
valleys of eastern San Bernardino County (the "Cadiz Project").
Under the Cadiz Project, surplus water from the Colorado River
would be stored in the aquifer system underlying our land during
wet years.  When needed, the stored water, together with
indigenous groundwater, could be returned to the Colorado River
Aqueduct for distribution to Metropolitan's member agencies
throughout six southern California counties.

     Between 1997 and 2002, Metropolitan staff and the Company
received substantially all of the various permits required to
construct and operate the project, including a federal Record of
Decision from the U.S. Department of Interior, which endorsed the
Cadiz Project and granted a right-of-way for construction of
project facilities.  The federal government also approved a Final
Environmental Impact Statement ("FEIS") in compliance with the
National Environmental Policy Act ("NEPA").

     Despite the significant progress made in the federal
environmental review process, in October 2002 Metropolitan's
Board refused to consider whether or not to certify the Final
Environmental Impact Report ("FEIR"), which was a necessary
action to authorize implementation of the Cadiz Project in
accordance with the California Environmental Quality Act
("CEQA").

     Regardless of the Metropolitan Board's actions in October
2002, Southern California's need for water storage and supply
programs has not abated. Therefore we continue to pursue the
completion of the environmental review process for the Cadiz
Project. To that end we are

                          Page 15

now in advanced discussions with a third party public agency that
would assume the role of CEQA lead agency and complete the state
of California environmental review process.  We are also working
directly with the U.S. Department of Interior to have the permits
that were approved during the federal environmental review process,
including the right-of-way granted in the Record of Decision to
Metropolitan, issued directly to the Company.  Additionally, we
are in discussions with several other public agencies regarding their
interest in participating in the Cadiz Project. All of these agencies
have access to independent sources of supply that can be stored by
the Cadiz Project.  See "Water Resource Development", below.

     Due to significant population growth in Southern California,
where our properties are located, we have also begun to explore
additional uses of our land assets. To this end, we have retained
outside services to conduct a detailed analysis of our land
assets and assess the opportunities for these properties.

     We expect that these alternative scenarios will have
different capital requirements and implementation periods than
those previously established for the Cadiz Project.  Therefore,
following Metropolitan's actions in 2002, we have entered into a
series of agreements with our senior secured lender, ING Capital
LLC ("ING") pursuant to which we reduced our debt to ING to $25
million and extended the maturity date of the ING debt until
March 31, 2010, conditioned upon a further principal reduction of
$10 million on or before March 31, 2008.  In addition, we have
raised approximately $35 million in equity through private
placements completed in 2003 and 2004.  Most recently, on
November 30, 2004, we completed a private placement of 400,000
Units at the price of $60.00 per Unit.  Each Unit consisted of
five (5) shares of the Company's common stock and one (1) common
stock purchase warrant.  Each Warrant entitled the holder to
purchase one (1) share of common stock at an exercise price of
$15.00 per share.  Each Warrant has a term of three (3) years,
but is callable by us if the closing market price of our common
stock exceeds $18.75 for 10 consecutive trading days.

     We used approximately half of the proceeds of the placement
to reduce our senior debt to ING.  The balance of the proceeds
are being used by the Company for working capital.

     Further, in February 2005, our wholly owned subsidiary Sun
World International, Inc. ("Sun World") completed the sale of
substantially all of its assets, and Sun World's consensual plan
of reorganization was confirmed by the U.S. Bankruptcy Court in
August 2005.  See "Item 1.  General Development of Business",
above.  Sun World entered bankruptcy proceedings on January 30,
2003, following which the financial statements of Sun World are
no longer consolidated with ours.

     With the implementation of these steps, we have been able to
retain ownership of all of our land assets and assets relating to
our water programs and also to obtain working capital needed to
continue our efforts to develop our water programs.  Because many
of our pre-existing common stockholders have participated in the
2003 and 2004 private placements, our base of common stockholders
remains largely the same as before these placements.

                          Page 16

RESULTS OF OPERATIONS

(A)  YEAR ENDED DECEMBER 31, 2005 COMPARED TO YEAR ENDED
     DECEMBER 31, 2004
     ---------------------------------------------------

     We have not received significant revenues from our water
resource and real estate development activity to date.  As a
result, we continue to incur a net loss from operations.  We had
revenues of $1.2 million for the year ended December 31, 2005 and
$47 thousand for the year ended December 31, 2004.  Our net loss
totaled $23.0 million for the year ended December 31, 2005
compared with a net loss of $16.0 million for the year ended
December 31, 2004.  The higher loss for the 2005 period resulted
primarily from non-cash compensation expenses of $16.7 million
from stock and option awards under our Management Equity
Incentive Plan.  No such expense was incurred in 2004.  The 2004
period included the write-off of $3.4 million of permanent and
developing crops, $2.8 million higher amortization of deferred
borrowing costs and a $1.4 million write-off of deferred
borrowing costs.  General and administrative costs increased $1.0
million in 2005.

     Our primary expenses are our ongoing overhead costs (i.e.
general and administrative expense) and our interest expense.
During the upcoming year ending December 31, 2006 we expect to
incur additional non-cash expenses in connection with our
Management Equity Incentive Plan.  The issuance of these shares,
or options to purchase these shares, results in a charge to our
earnings based on the value of our common stock at the time of
issue and the valuation of options at the time of their award and
is recorded over the vesting period in proportion to the
quantities vested. The value of our common stock at the time of
issue and the valuation of options at the time of their award
will be added to additional paid-in capital with the result that
there will not be a net reduction to shareholders' equity as a
result of the issuances.

     REVENUES.  Revenue totaled $1.2 million during the year
ended December 31, 2005 compared to $47 thousand during the year
ended December 31, 2004.  2005 revenues include $1.1 million of
citrus crop sales, $35 thousand of crop rental income and $39
thousand of other rental income.  The 2005 revenue increase is
primarily due to citrus crops that Cadiz farmed in 2005.  In 2004
Cadiz leased these crops to Sun World and did not include Sun
World's revenues from citrus crop sales in the consolidated
financial statements because Sun World was in bankruptcy.  We no
longer consider agriculture to be our core business.  When
possible, we prefer to lease our vineyards and citrus groves to
third parties so that we can focus our resources on our water and
real estate development programs.

     COST OF SALES.  Cost of Sales totaled $994,000 during the
year ended December 31, 2005, reflecting the production and sale
of citrus crops at the Cadiz Ranch property.  Cadiz leased these
crops to Sun World in 2004 and did not include Sun World's cost
of sales in the consolidated financial statements because Sun
World was in bankruptcy.

     GENERAL AND ADMINISTRATIVE EXPENSES.  General and
administrative expenses during the year ended December 31, 2005
totaled $4.1 million compared with $3.1 million for the year
ended December 31, 2004.  Higher expenses were primarily related
to legal and consulting fees incurred related to water
development efforts, accounting expenses related to Sarbanes
Oxley compliance and initial listing costs for our listing on The
NASDAQ National Market.

                          Page 17

     COMPENSATION COSTS FROM STOCK AND OPTION AWARDS.
Compensation costs from stock and option awards for the year
ended December 31, 2005 totaled $16.7 million.  The costs consist
of non-cash compensation expenses relating to stock and option
grants issued under the Management Equity Incentive Plan.  The
grants and related accounting are discussed further in the Notes
to the Consolidated Financial Statements.  There were no
comparable stock and option grants during the year ended December
31, 2004.

     DEPRECIATION AND AMORTIZATION.  Depreciation and
amortization totaled $0.2 million for the year ended December 31,
2005 compared to $0.5 million for 2004.  The reduction in
depreciation and amortization is due to certain assets becoming
fully depreciated during 2005 and the write down of certain
assets no longer used or useful in the restructured Cadiz
business.

     INTEREST EXPENSE, NET.  Net interest expense totaled $1.9
million during the year ended December 31, 2005, compared to $9.1
million during 2004.  Lower interest expense was primarily due to
the November 30, 2004 debt restructuring and the repayment of $10
million of debt from the proceeds of the private placement of
common stock and warrants completed on that date.  The
restructuring transaction resulted in the amortization and write-
off during 2004 of the higher financing costs that had been
associated with the prior debt structure.  The following table
summarizes the components of net interest expense for the two
periods (in thousands):

                                           YEAR ENDED DECEMBER 31,
                                           -----------------------
                                              2005       2004
                                              ----       ----
     Cadiz
        Interest on outstanding debt        $ 2,062    $ 3,970
        Amortization of financing costs          28      3,767
        Write off of unamortized
         financing costs                          -      1,369
        Interest income                        (159)       (42)
                                            -------    -------

                                            $ 1,931    $ 9,064
                                            =======    =======

     Financing costs, which include legal fees and warrant costs,
are amortized over the life of the ING debt agreement.  In
November, 2004 we entered into an agreement with ING which
restructured our loan and extended the maturity date from March
31, 2005 to March 31, 2010.  As a result, all deferred financing
costs associated with the prior loan were fully expensed on the
November 30, 2004 amendment date.

(B)  YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED
     DECEMBER 31, 2003
     ---------------------------------------------------

     Our consolidated financial statements for the year ended
December 31, 2003 include the results of operations for Sun World
only for the period January 1, 2003 through January 30, 2003.
The results of operations of Sun World subsequent to January 30,
2003 are not included in these consolidated financial statements.
As a result of the foregoing, direct comparisons of our
consolidated results of operations for year ended December 31,
2004 with results for the year ended December 31, 2003 do not, in
our view, prove meaningful.

                          Page 18

     Tables which disclose the results of Cadiz Inc. separate
from its consolidated subsidiary Sun World for the year ended
December 31, 2003, and from which the numbers used in the
following discussion are derived, can be found in Note 7 to the
Consolidated Financial Statements.

     We had revenues of $47 thousand for the year ended December
31, 2004 and $3.2 million for the year ended December 31, 2003,
including $3.0 million from Sun World for the month ended January
30, 2003.  Our net loss totaled $16.0 million for the year ended
December 31, 2004 compared to $11.5 million for the year ended
December 31, 2003 which included a $2.5 million loss from Sun
World for the period ended January 30, 2003. The increase for the
2004 period resulted from the write off of permanent and
developing crops in the amount of $3.4 million, a $2.8 million
increase in interest cost resulting from amortization of deferred
borrowing costs, and write offs of unamortized deferred borrowing
costs of $1.4 million. General and administrative costs declined
by $2.2 million in 2004.

     REVENUES.  Revenue totaled $47 thousand during the year
ended December 31, 2004 compared to $3.2 million the preceding
year. The $3.2 million in 2003 includes $0.3 million attributable
to Cadiz with the remainder attributable to Sun World for the
period ended January 30, 2003. The Cadiz decrease from $0.3
million to $47 thousand is primarily due to discontinuation of
the management fee and other fees payable to Cadiz by Sun World
as of January 30, 2003 due to Sun World's Chapter 11 filing. The
revenue during the year ended December 31, 2004 was derived
primarily from the lease of farming property to a third party.
No revenue was derived from the lease to Sun World during the
year ended December 31, 2004 as such revenue was contingent on
profitability of the harvest, which profitability was not
achieved under the terms of the lease.

     GENERAL AND ADMINISTRATIVE EXPENSES.  General and
administrative expenses during the year ended December 31, 2004
totaled $3.1 million compared to $5.2 million for the year ended
December 31, 2003.  Excluding Sun World, Cadiz general and
administrative expenses during the year ended December 31, 2003
were $4.7 million. The decrease in Cadiz' general and
administrative expenses in 2004 is primarily due to reductions in
salaries which included a contract termination payment to the
Company's CEO of $0.8 million in 2003 and increased professional
fees in 2003 related to transactions with our secured lender, our
equity raising activities, and the Sun World bankruptcy.

     WRITE OFF OF INVESTMENT IN SUBSIDIARY.  On January 30, 2003,
Sun World and certain of its subsidiaries filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code. As
of that date, due to the Company's loss of control over the
operations of Sun World, the financial statements of Sun World
are no longer consolidated with those of Cadiz, but instead Cadiz
accounts for its investment in Sun World on the cost basis of
accounting. As a result of changing to the cost basis of
accounting and because the Company did not believe it will be
able to recover its investment, the Company wrote off its
investment in Sun World of $195,000 in 2003. There was no similar
expense in 2004.

     REORGANIZATION COSTS.  Reorganization costs totaled $0.7
million during 2003.  These costs were incurred by Sun World
during January 2003 related to the Chapter 11 bankruptcy filing.
No such costs occurred during 2004.

                          Page 19

     WRITE OFF OF PERMANENT CROPS AND DEVELOPING CROPS.  In the
last quarter of the year ended December 31, 2004, the long-
standing lease for a portion of our Cadiz Valley farming property
to Sun World expired and the crops have not been leased to
another party.  The remaining property, which is leased to an
independent third party on a year to year basis, does not
generate a significant amount of revenue. Based on the
uncertainty as to possible recovery of the carrying value of the
permanent crops and developing crops on this property, during the
last quarter of 2004 we wrote off our investment in permanent and
developing crops at this property in the amount of $3.4 million,
net of depreciation.  See Note 2 to our Consolidated Financial
Statements.  No such write offs occurred during 2003.

     DEPRECIATION AND AMORTIZATION.  Depreciation and
amortization for Cadiz totaled $0.5 million for the year ended
December 31, 2004 compared to $0.7 million for the 2003 year. The
reduction in depreciation and amortization is due to certain
assets becoming fully depreciated during 2004 and $0.2 million
attributable to Sun World included in the period ended January
30, 2003 which did not exist in 2004.

     INTEREST EXPENSE, NET.  Net interest expense totaled $9.1
million during the year ended December 31, 2004, compared to $4.9
million during 2003, of which $3.6 million was attributable to
Cadiz excluding Sun World. The following table summarizes the
components of Cadiz net interest expense and that of Sun World
for the two periods (in thousands):

                                           YEAR ENDED DECEMBER 31,
                                           -----------------------
                                              2004       2003
                                              ----       ----

      Cadiz
        Interest on outstanding debt        $ 3,970    $ 3,053
        Amortization of financing costs       3,767        641
        Write off of unamortized
         financing costs                      1,369          -
        Interest income                         (42)       (58)
        Sun World interest expense                -      1,269
                                            -------    -------

                                            $ 9,064    $ 4,905
                                            =======    =======

     Financing costs, which include legal fees, warrant costs and
preferred stock, are amortized over the life of the ING debt
agreement. In December 2003 we entered into an agreement with ING
which extended the maturity date of our loan, which had a prior
maturity date of January 31, 2003. As a result there was little
amortization during 2003 as the deferred financing costs were
fully amortized at the January 2003 maturity date. Following
several months of discussion with ING, our loan was amended in
December 2003 and the financing costs associated with the debt
amendment of $5.3 million (consisting of fees of $0.3 million and
preferred stock valued at $5.0 million) were being amortized
through the maturity date of March 31, 2005. On November 30, 2004
we entered into another amendment of the loan agreement, under
which the term of  the loan was extended, the interest rate was
reduced, and a portion of the principal balance was repaid
necessitating the write off of the remaining $1.4 million in
unamortized financing costs associated with the loan under the
terms applicable as of December 2003.

                          Page 20

LIQUIDITY AND CAPITAL RESOURCES

(A)  CURRENT FINANCING ARRANGEMENTS
     ------------------------------

     CADIZ OBLIGATIONS.  As we have not received significant
revenues from our water resource and real estate activity to
date, we have been required to obtain financing to bridge the gap
between the time water resource and real estate development
expenses are incurred and the time that revenue will commence.
Historically, we have addressed these needs primarily through
secured debt financing arrangements with our lenders, private
equity placements and the exercise of outstanding stock options.

     Subsequent to the vote of Metropolitan's Board in October
2002 to not proceed with the Cadiz Project and Sun World's
January 2003 bankruptcy filing, we have worked with our primary
secured lender, ING Capital LLC, to structure our debt in a way
which would allow us to continue our development of the Cadiz
Project.  We believe that we have accomplished this goal with a
series of agreements with ING, in the most recent of which
concluded in November 2004.

     In November 2004 we entered into our most recent series of
agreements with ING which provided for:

  *  the repayment in full of our senior term loan facility with
     ING and the reduction to $25 million of the outstanding
     principal balance under our existing revolving credit
     facility; and

  *  amendments to the terms and conditions of our revolving
     credit facility with ING in order to:

          (i)  extend the maturity date of the debt until March
               31, 2010, conditioned upon a further principal
               reduction of $10 million on or before March 31,
               2008, and

          (ii) reduce the interest rate through March 31, 2008 on
               the new outstanding balance to 4% cash plus 4% PIK
               (increasing to 4% cash plus 6% PIK for interest
               periods commencing on and after April 1, 2008).

     Also in November 2004 ING agreed to convert 99,000 shares of
the Company's Series F Preferred Stock (representing 99% of the
outstanding shares of Series F Preferred Stock) into 1,711,665
shares of the Company's common stock.  We had issued 100,000
shares of Series F preferred stock to ING as part of our
agreements in December 2003.

     Concurrently with this conversion, the terms and conditions
of the remaining outstanding Series F Preferred Stock were
amended to fix the conversion ratio at its original conversion
ratio of 17.28955 shares of common stock for each share of Series
F Preferred Stock converted.  In addition to its conversation
rights, as the holder of this preferred stock ING holds:

     -  The right to appoint two members of our Board of Directors
        as long as both (a) the outstanding principal balance of ING's
        loan is at least $15 million, and (b) the Series F Preferred
        Stock holdings of ING (including

                          Page 21

        both the common stock into which outstanding Series F Preferred
        Stock is then convertible and any common stock received by
        ING upon previous conversions of Series F Preferred Stock which
        remains held by, and has not been disposed of, by ING) represent
        at least 5% of our common stock;
     -  The right to approve the authorization or issuance of any
        other class or shares of our preferred stock;
     -  Anti-dilution protection;
     -  Pre-emptive rights;
     -  Registration rights; and
     -  Dividend, liquidation and voting rights shared on an as-converted
        basis with common stock.

     Pursuant to our loan arrangements with ING, ING also has the
right to appoint an independent manager to the Board of Managers
of Cadiz Real Estate LLC, a Delaware limited liability company
("Cadiz Real Estate"), in which we hold 100% of the economic
interests.  In December 2003 we transferred substantially all of
our assets (with the exception of our office sublease, certain
office furniture and any Sun World related assets) to Cadiz Real
Estate.  Cadiz Real Estate is a co-obligor with us on our credit
facilities with ING, and the properties now held of record by
Cadiz Real Estate secure our obligations under these facilities.
We have entered into a management agreement with Cadiz Real
Estate pursuant to which we manage the assets now held by Cadiz
Real Estate, subject to the requirements of the Operating
Agreement of Cadiz Real Estate.  The Operating Agreement of Cadiz
Real Estate provides for a Board of Managers consisting of two
managers appointed by us and one independent manager named by
ING.  As long as our obligations to ING are outstanding, Cadiz
Real Estate may not institute bankruptcy proceedings without the
unanimous consent of this Board of Managers (including the
independent manager).

     The debt covenants associated with our ING credit facility
were negotiated by the parties with a view towards our operating
and financial condition as it existed at the time the revised
agreements executed.  Given current circumstances, we do not
consider it likely that we will be in material breach of such
covenants.  At December 31, 2005, the Company was in compliance
with its debt covenants.

     As we continue to actively pursue our business strategy,
additional financing specifically in connection with our water
programs will be required.  See "Outlook", below.  As the parties
have anticipated this need, the covenants in the credit facility
which would otherwise prohibit our incurrence of additional debt
(or our use of our assets as security for such debt) contain an
exception for debt and liens incurred in order to finance the
acquisition, construction or improvement of any assets (up to a
maximum of $135 million at any one time outstanding).  The
covenants in the credit facility do not prohibit our use of
equity financing, but do provide that 35% of the proceeds of such
issuance be applied as a prepayment against such facility.  We do
not expect these covenants to materially limit our ability to
undertake debt or equity financing in order to finance our water
development activities.

     At December 31, 2005, we have no outstanding credit
facilities or preferred stock other than that held by ING as
described above.

                          Page 22

SUN WORLD OBLIGATIONS
---------------------

     We have obtained waivers and/or releases with respect to
our previously issued guarantees of the First Mortgage Notes from
all the holders of outstanding First Mortgage Notes.  Further, as
part of a December 2003 global settlement, we have settled all of
our claims and obligations with Sun World.  With the confirmation
of Sun World's consensual plan of reorganization by the U.S.
Bankruptcy Court in August, 2005 and the effectiveness of the
Plan in September, 2005, Cadiz is released from all liabilities
under the guarantees of Sun World's previously outstanding First
Mortgage Notes.  Further, although we continue to be the record
owner of Sun World's stock, with the sale by Sun World of all of
its assets Sun World does not conduct any business operations and
therefore has no working capital needs at present.

     CASH USED FOR OPERATING ACTIVITIES.  Cash used for
operating activities totaled $3.7 million for the year ended
December 31, 2005, as compared to cash used for operating
activities of $7.6 million for the year ended December 31, 2004.
The $3.9 million decrease was primarily due to a reduction in
cash interest paid, as all interest expense incurred under the
restructured ING loan during 2005 was either credited against a
prepaid interest account or added to the principal balance
outstanding.  The prepaid interest account will not be sufficient
to cover the entire amount of the cash interest payment due on
September 30, 2006, and a $55,000 cash interest payment will be
due at that time.

     CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES.  Cash
used in investing activities totaled $68 thousand for the year
ended December 31, 2005, as compared to $2.1 million provided by
investing activities during the same period in 2003.

     The $2.1 million cash provided by investing activities for the
year ended December 31, 2004 was almost entirely due to the
reduction of restricted cash that had been placed in a restricted
bank account to pay for interest on the $35 million term loan
facility with ING.  The use of a restricted bank account for this
purpose had been a requirement under our pre-November 2004
arrangements with ING.  On November 30, 2004 the restricted cash
account mechanism was replaced with a prepaid interest credit
account.  Reductions in the prepaid interest credit account are
reflected in Cash Used for Operating Activities, as described
above.

     CASH PROVIDED BY FINANCING ACTIVITIES.  Cash provided by
financing activities totaled $40,000 for the year ended December
31, 2005, compared with $11.1 million for the year ended December
31, 2004.  There was no material financing activity in 2005.  In
contrast a $25 million private placement of common stock and
warrants was completed on November 30, 2004, and $10 million of
the $21.3 million in net proceeds realized in the placement were
applied to the repayment of term loan borrowings.

(B)  OUTLOOK
     -------

     SHORT TERM OUTLOOK.  The proceeds of our 2003 and 2004
private placements have provided us with sufficient cash to meet
our expected working capital needs for current operations until
the Company will need to raise additional capital in order to
fund the $10 million mandatory repayment of its borrowing from
ING due on or before March 2008.  See "Long Term Outlook", below.
Approximately $12.7 million of the proceeds of our November 2004
private placement were used to reduce the principal balance,
which included approximately $2.7 million of interest payable in
kind ("PIK"), owed to ING under our ING credit facilities to $25
million.  40

                          Page 23

Units in the 2004 private placement were issued to ING to prepay
$2.4 million of future cash interest payments due under the
Company's $25 million borrowing from the lender.  The remainder
of the proceeds from the placements will be used to meet our
ongoing working capital needs.

    LONG TERM OUTLOOK.  The current maturity date of our loan
with ING is March 2010, and we will need to fund a $10 million
mandatory principal repayment on or before March 31, 2008.  In
the meantime, our working capital needs will be determined based
upon the specific measures we pursue in the development of our
water resources and real estate assets.  We will evaluate the
amount of cash needed to fund our development activities and our
repayment obligations, and the manner in which such cash will be
raised, on an ongoing basis.  We may meet any such future cash
requirements through a variety of means to be determined at the
appropriate time.  Such means may include equity or debt
placements, or the sale or other disposition of assets.  Equity
placements would be undertaken only to the extent necessary so as
to minimize the dilutive effect of any such placements upon our
existing stockholders.

(C)  CRITICAL ACCOUNTING POLICIES
     ----------------------------

     As discussed in Note 2 to the Consolidated Financial
Statements of Cadiz, the preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect amounts reported in the accompanying
consolidated financial statements and related footnotes. In
preparing these financial statements, management has made its
best estimates and judgments of certain amounts included in the
financial statements based on all relevant information available
at the time and giving due to consideration to materiality. We do
not believe there is a great likelihood that materially different
amounts would be reported related to the accounting policies
described below.  However, application of these policies involves
the exercise of judgment and use of assumptions as to future
uncertainties and, as a result, actual results could differ from
these estimates.  Management has concluded that the following
critical accounting policies described below affect the most
significant judgments and estimates used in the preparation of
the consolidated financial statements.

     (1)  PRINCIPLES OF CONSOLIDATION The Consolidated
Financial Statements have been prepared by Cadiz Inc., sometimes
referred to as "Cadiz" or "the Company".  On January 30, 2003,
Sun World filed voluntary petitions under Chapter 11 of the
Bankruptcy Code. Since the filing date, Sun World has operated
its business and managed its affairs as debtor and debtor in
possession.  As of that date due to the Company's loss of control
over the operations of Sun World, the financial statements of Sun
World are no longer consolidated with those of Cadiz, but
instead, Cadiz is accounting for its investment in Sun World on
the cost basis of accounting.  As a result, the Company wrote off
its net investment in Sun World of $195,000 at the Chapter 11
filing date because it did not anticipate being able to recover
its investment.  The foregoing Consolidated Financial Statements
include the accounts of the Company and, until January 30, 2003,
those of its then wholly-owned subsidiary, Sun World
International, Inc. and its subsidiaries collectively referred to
as "Sun World", and contain all adjustments, consisting only of
normal recurring adjustments, which the Company considers
necessary for a fair presentation.  Certain reclassifications
have been made to the prior period to conform to the current
period presentation.

                          Page 24

     (2)  Intangible and Other Long-Lived Assets.  Property,
plant and equipment, intangible and certain other long-lived
assets are amortized over their useful lives.  Useful lives are
based on management's estimates of the period that the assets
will generate revenue. Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.  As
a result of the actions taken by Metropolitan in the fourth
quarter of 2002 as described in Note 1, the Company, with the
assistance of a valuation firm, evaluated the carrying value of
its water program and determined that the asset was not impaired
and that the costs expect to be recovered through sale or
operation of the project.  The Company reevaluates the carrying
value of its water program annually during the first quarter of
each year and has confirmed that the carrying value of the water
program is not impaired as of December 31, 2005.

     During the fourth quarter of the year ended December 31,
2004, the long-standing lease to Sun World for a portion of the
permanent and developing crops at the Cadiz Valley property
terminated and the crops have not been leased to any other party.
The lease to an independent third party for the remainder of the
crops is on a year to year basis and does not generate a
significant amount of revenue.  Based on the uncertainty as to
possible recovery of the carrying value of the permanent crops
and developing crops the Company recorded a charge of $3.4
million to write off the capitalized costs related to these crops
which is shown under the heading "Write-off of permanent and
developing crops" on the Consolidated Statement of Operations.

     (3) GOODWILL. As a result of a merger in May 1988 between
two companies, which eventually became known as Cadiz Inc.,
goodwill in the amount of $7,006,000 was recorded.  Approximately
$3,193,000 of this amount was amortized until the adoption of
Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 142, ("SFAS No. 142")
"Goodwill and Other Intangible Assets" on January 1, 2002.
Goodwill is tested for impairment annually in the first quarter,
or if events occur which require an impairment analysis be
performed.  As a result of the actions taken by Metropolitan in
the fourth quarter of 2002 as described in Note 1, the Company,
with the assistance of a valuation firm, performed an impairment
test of its goodwill and determined that its goodwill was not
impaired.  In addition, in the first quarter of 2005, 2004 and
2003, the Company, performed its annual impairment test of
goodwill and determined that its goodwill was not impaired.

     (4)  Deferred Tax Assets and Valuation Allowances.  To date,
we have had a history of net operating losses as we have not
generated significant revenue from our water development programs
and Sun World had experienced losses from its agricultural
operations. As such, we have generated significant deferred tax
assets, including large net operating loss carry forwards for
federal and state income taxes for which we have a full valuation
allowance. Management is currently working on initiatives at
Cadiz that are designed to generate future taxable income,
although there can be no guarantee that this will occur. As
taxable income is generated, some portion or all of the valuation
allowance will be reversed and an increase in net income would
consequently be reported in future years.

(D)  NEW ACCOUNTING PRONOUNCEMENTS
     -----------------------------

     In December 2004, the FASB revised Statement No. 123 (FAS
123R), "Share-Based Payment", which requires companies to expense
the estimated fair value of employee stock options and similar
awards.  On April 14, 2005, the U.S. Securities and Exchange
Commission adopted a new rule amending the compliance dates for
FAS 123R.  In accordance with the new

                          Page 25

rule, the accounting provisions of FAS 123R will be effective for
the Company beginning in the first quarter of fiscal 2006.  The
Company tentatively expects to adopt the provisions of FAS123R using
a modified prospective application.  FAS 123R, which provides
certain changes to the method of valuing share-based compensation
among other changes, will apply to new awards and to awards that
are outstanding on the effective date and are subsequently
modified or cancelled.  Compensation expense for outstanding
awards for which the requisite service had not been rendered as
of the effective date will be recognized over the remaining
service period using the compensation cost calculated for pro
forma disclosure purposes under FAS 123.  The Company will incur
additional expense during fiscal 2006 related to new awards granted
during 2006 that cannot yet be quantified.  The Company is in the
process of determining how the guidance regarding value share-
based compensation as prescribed in FAS 123R will be applied to
value share-based awards granted after the effective date and the
impact that the recognition of compensation expense related to
such awards will have on its financial statements.

     In December 2004, the FASB issued SFAS No. 153, "Exchange of
Nonmonetary Assets, an amendment of APB Opinion No. 29." SFAS No.
153 is based on the principle that exchanges of nonmonetary
assets should be measured based on the fair value of the assets
exchanged.  APB Opinion No. 29, "Accounting for Nonmonetary
Transactions," provided an exception to its basic measurement
principle (fair value) for exchanges of similar productive
assets.  Under APB Opinion No. 29, an exchange of a productive
asset for a similar productive asset was based on the recorded
amount of the asset relinquished.  SFAS No. 153 eliminates this
exception and replaces it with an exception of exchanges of
nonmonetary assets that do not have commercial substance.  The
Company has concluded that SFAS No. 153. will not have a material
impact on its consolidated financial statements.

     In March 2005, the FASB issued FIN 47, " Accounting for
Conditional Asset Retirement Obligations," an interpretation of
SFAS 143.  This statement clarified the term conditional asset
retirement obligation and is effective for the Company's fourth
quarter ending December 31, 2005.  Adoption of FIN 47 did not
have an impact on the Company's consolidated financial
statements.

(E)  OFF BALANCE SHEET ARRANGEMENTS
     ------------------------------

     Cadiz does not have any off balance sheet arrangements at
this time.

(F)  CERTAIN KNOWN CONTRACTUAL OBLIGATIONS
     -------------------------------------

                                PAYMENTS DUE BY PERIOD
CONTRACTUAL             LESS THAN
OBLIGATIONS    TOTAL      1 YEAR   1-3 YEARS   4-5 YEARS   AFTER 5 YEARS
-----------    -----    ---------  ---------   ---------   -------------

Long term debt
 obligations  $ 25,891  $      8   $ 10,027    $ 15,856      $      -

Interest
 payable         2,875        55      2,684         136             -

Operating
 leases             57        55          2           -             -
              --------  --------   --------    --------      --------
              $ 28,823  $    118   $ 12,713    $ 15,992      $      -
              ========  ========   ========    ========      ========

                          Page 26

     Cadiz long-term debt included in the table above reflects
the most recent arrangements with ING which were concluded in
November 2004 as described above in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operation; Liquidity and Capital Resources; Cadiz Obligations.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

     We are exposed to market risk from changes in interest rates
on long-term debt obligations that impact the fair value of these
obligations. Our policy is to manage interest rates
fair values by year of scheduled maturities to evaluate the
expected cash flows and sensitivity to interest rate changes (in
thousands of dollars). A 1% change in interest rate on the
Company long term debt obligation would have resulted in interest
expense fluctuating by approximately $252,000 during the year
ended December 31, 2005.  Circumstances could arise which may
cause interest rates and the timing and amount of actual cash
flows to differ materially from the schedule below:

                            LONG-TERM DEBT
                    -------------------------------------------------------
                    FIXED RATE     AVERAGE     VARIABLE RATE     AVERAGE
EXPECTED MATURITY   MATURITIES  INTEREST RATE    MATURITIES   INTEREST RATE
-----------------   ----------  -------------  -------------  -------------

      2008           $ 10,000        8.0%        $      -       $      -
                     ========        ====        ========       ========
      2010           $ 15,000        8.8%        $      -       $      -
                     ========        ====        ========       ========

     Cadiz long-term debt included in the table above reflects
the debt restructuring which occurred in December 2004 as
described above in Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations; Liquidity and
Capital Resources; Cadiz Obligations.

     With the confirmation of Sun World's consensual plan of
reorganization by the U.S. Bankruptcy Court in August, 2005 and
the effectiveness of the Plan in September, 2005, Cadiz is
released from all liabilities under the guarantees of First
Mortgage Notes issued by Sun World.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The information required by this item is submitted in
response to Part IV below. See the Index to Consolidated
Financial Statements.


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

       Not applicable.

                          Page 27

ITEM 9A.  CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

     We have established disclosure controls and procedures to
ensure that material information related to the Company,
including its consolidated entities, is accumulated and
communicated to senior management, including the Chairman and
Chief Executive Officer (the "Principal Executive Officer") and
Chief Financial Officer (the "Principal Financial Officer") and
to our Board of Directors.  Based on their evaluation as of
December 31, 2005, our Principal Executive Officer and Principal
Financial Officer have concluded that the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-
15(e) under the Securities Exchange Act of 1934) are effective to
ensure that the information required to be disclosed by the
Company in the reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms, and such
information is accumulated and communicated to management,
including the principal executive and principal financial
officers as appropriate, to allow timely decisions regarding
required disclosures.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     Our management is responsible for establishing and
maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act Rule 13a-15(f).  Under
the supervision and with the participation of our management,
including our Principal Executive Officer and Principal Financial
Officer, we evaluated the effectiveness of our internal control
over financial reporting based on the criteria in the Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.  Based on
our evaluation under that framework, our management concluded
that our internal control over financial reporting was effective
as of December 31, 2005. Our management's assessment of the
effectiveness of our internal control over financial reporting as
of December 31, 2005 has been audited by PricewaterhouseCoopers
LLP, an independent registered public accounting firm, as stated
in their report which is included herein.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

     In connection with the evaluation required by paragraph (d)
of Rule 13a-15 under the Exchange Act, there was no change
identified in the Company's internal control over financial
reporting that occurred during the last fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.


ITEM 9B.  OTHER INFORMATION

     Not applicable at this time.

                          Page 28

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information called for by this item is incorporated
herein by reference to the definitive proxy statement involving
the election of directors which we intend to file with the SEC
pursuant to Regulation 14A under the Securities and Exchange Act
of 1934 not later than 120 days after December 31, 2005.


ITEM 11.  EXECUTIVE COMPENSATION

     The information called for by this item is incorporated
herein by reference to the definitive proxy statement involving
the election of directors which we intend to file with the SEC
pursuant to Regulation 14A under the Securities and Exchange Act
of 1934 not later than 120 days after December 31, 2005.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT

     The information called for by this item is incorporated
herein by reference to the definitive proxy statement involving
the election of directors which we intend to file with the SEC
pursuant to Regulation 14A under the Securities and Exchange Act
of 1934 not later than 120 days after December 31, 2005.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information called for by this item is incorporated
herein by reference to the definitive proxy statement involving
the election of directors which we intend to file with the SEC
pursuant to Regulation 14A under the Securities and Exchange Act
of 1934 not later than 120 days after December 31, 2005.


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information called for by this item is incorporated
herein by reference to the definitive proxy statement involving
the election of directors which we intend to file with the SEC
pursuant to Regulation 14A under the Securities and Exchange Act
of 1934 not later than 120 days after December 31, 2005.

                          Page 29

PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

       (a)  1.  Financial Statements.  See Index to
                Consolidated Financial Statements.

            2.  Financial Statement Schedule.  See Index
                to Consolidated Financial Statements.

            3.  Exhibits.

     The following exhibits are filed or incorporated by
reference as part of this Form 10-K.

       3.1   Cadiz Certificate of Incorporation, as amended(1)

       3.2   Amendment to Cadiz Certificate of Incorporation
             dated November 8, 1996(2)

       3.3   Amendment to Cadiz Certificate of Incorporation
             dated September 1, 1998(3)

       3.4   Amendment to Cadiz Certificate of Incorporation
             dated December 15, 2003(7)

       3.5   Certificate of Elimination of Series D Preferred
             Stock, Series E-1 Preferred Stock and Series E-2
             Preferred Stock of Cadiz Inc. dated December 15,
             2003(7)

       3.6   Certificate of Elimination of Series A Junior
             Participating Preferred Stock of Cadiz Inc., dated
             March 25, 2004(7)

       3.7   Amended and Restated Certificate of Designations of
             Series F Preferred Stock of Cadiz Inc.(8)

       3.8   Cadiz Bylaws, as amended (4)

       10.1  Agreement Regarding Employment Between Cadiz Inc.
             and Keith Brackpool dated July 5, 2003(6)

       10.2  Sixth Amended and Restated Credit Agreement, dated
             as of December 15, 2003, among Cadiz Inc., Cadiz
             Real Estate LLC, and ING Capital LLC, as
             Administrative Agent, and the lenders party
             thereto(7)

       10.3  First Amendment to 2003 Restated Credit Agreement
             and Consent to Offering, dated as of November 30,
             2004, among Cadiz Inc., Cadiz Real Estate LLC, and
             ING Capital LLC, as Administrative Agent, and the
             lenders party thereto.(9)

       10.4  ING Capital LLC Second Amended and Restated Tranche
             A Note, dated as of November 30, 2004, in principal
             amount of $15 million.(9)

                          Page 30

       10.5  ING Capital LLC Second Amended and Restated Tranche
             B Note, dated as of November 30, 2004, in principal
             amount of $10 million.(9)

       10.6  Limited Liability Company Agreement of Cadiz
             Real Estate LLC dated December 11, 2003(7)

       10.7  Amendment No. 1, dated October 29, 2004, to Limited
             Liability Company Agreement of Cadiz Real Estate
             LLC.(9)

       10.8  The Cadiz Groundwater Storage and Dry-Year Supply
             Program Definitive Economic Terms and
             Responsibilities between Metropolitan Water
             District of Southern California and Cadiz dated
             March 6, 2001(5)

       10.9  Resolution of the Directors of Cadiz Inc.,
             authorizing the Management Equity Incentive Plan.
             (7)

       10.10 Supplemental Resolutions of the Compensation
             Committee of the Board of Directors of Cadiz Inc.,
             regarding the Management Equity Incentive Plan.(9)

       10.11 Form of Incentive Plan Stock Option Agreement(10)

       10.12 2004 Management Bonus Plan.(9)

       10.13 Consulting Agreement dated August 1, 2002 by and
             between Richard Stoddard and Cadiz Inc., and
             Extension of Consulting Agreement dated January 1,
             2004 by and between Richard Stoddard and Cadiz
             Inc.(9)

       10.14 Employment Agreement dated September 12, 2005
             between O'Donnell Iselin II and Cadiz Inc.(11)

       10.15 Settlement Agreement dated as of August 11, 2005 by
             and between Cadiz Inc., on the one hand, and Sun
             World International, Inc., Sun Desert, Inc.,
             Coachella Growers and Sun World/Rayo, on the other
             hand(12)

       21.1  Subsidiaries of the Registrant

       23.1  Consent of Independent Registered Public Accounting
             Firm

       31.1  Certification of Keith Brackpool, Chairman and
             Chief Executive Officer of Cadiz Inc. pursuant to
             Section 302 of the Sarbanes-Oxley Act of 2002

       31.2  Certification of O'Donnell Iselin II, Chief
             Financial Officer and Secretary of Cadiz Inc.
             pursuant to Section 302 of the Sarbanes-Oxley Act
             of 2002

       32.1  Certification of Keith Brackpool, Chairman and
             Chief Executive Officer of Cadiz Inc. pursuant to
             18 U.S.C. Section 1350, as adopted pursuant to
             Section 906 of the Sarbanes-Oxley Act of 2002

                          Page 31

       32.2  Certification of O'Donnell Iselin II, Chief
             Financial Officer and Secretary of Cadiz Inc.
             pursuant to 18 U.S.C. Section 1350, as adopted
             pursuant to Section 906 of the Sarbanes-Oxley Act
             of 2002

------------------------
          (1)  Previously filed as an Exhibit to our Registration
               Statement of Form S-1 (Registration No. 33-75642)
               declared effective May 16, 1994 filed on February
               23, 1994
          (2)  Previously filed as an Exhibit to our Report on
               Form 10-Q for the quarter ended September 30, 1996
               filed on November 14, 1996
          (3)  Previously filed as an Exhibit to our Quarterly
               Report on Form 10-Q for the quarter ended
               September 30, 1998 filed on November 13, 1998
          (4)  Previously filed as an Exhibit to our Quarterly
               Report on Form 10-Q for the quarter ended June 30,
               1999 filed on August 13, 1999
          (5)  Previously filed as an exhibit to our Annual
               Report on Form 10-K for the fiscal year ended
               December 31, 2001 filed on March 28, 2002
          (6)  Previously filed as an Exhibit to our Report on
               Form 10-Q for the quarter ended September 30, 2003
               filed on November 2, 2004
          (7)  Previously filed as an Exhibit to our Annual
               Report on Form 10-K for the year ended December
               31, 2003 filed on November 2, 2004.
          (8)  Previously filed as an Exhibit to our Current
               Report on Form 8-K dated November 30, 2004 filed
               on December 2, 2004.
          (9)  Previously filed as an Exhibit to our Annual
               Report on Form 10-K for the fiscal year ended
               December 31, 2004 filed on March 31, 2005
          (10) Previously filed as an Exhibit to our Form S-8
               Registration Statement No. 333-124626 filed on May
               4, 2005
          (11) Previously filed as an Exhibit to our Current
               Report on Form 8-K dated October 3, 2005 filed on
               October 3, 2005
          (12) Previously filed as an Exhibit to our Report on
               Form 10-Q for the quarter ended September 30, 2005
               filed on November 14, 2005

                          Page 32


INDEX TO FINANCIAL STATEMENTS

CADIZ INC. CONSOLIDATED FINANCIAL STATEMENTS

                                                            Page

Report of Independent Registered Public Accounting Firm. . . .34

Consolidated Statements of Operations for the three years ended
 December 31, 2005. . . . . . . . . . . . . . . . . . . . . . 36

Consolidated Balance Sheets as of December 31, 2005 and 2004. 37

Consolidated Statements of Cash Flows for the three years ended
 December 31, 2005. . . . . . . . . . . . . . . . . . . . . . 38

Consolidated Statements of Stockholders' Equity for the three
 years ended December 31, 2005. . . . . . . . . . . . . . . . 39

Notes to the Consolidated Financial Statements. . . . . . . . 40

Financial Statement Schedule. . . . . . . . . . . . . . . . . 64


(Schedules other than those listed above have been omitted since
they are either not required, inapplicable, or the required
information is included on the financial statements or notes
thereto.)

                          Page 33


     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Cadiz Inc.:

We have completed an integrated audit of Cadiz Inc.'s 2005
consolidated financial statements and of its internal control
over financial reporting as of December 31, 2005 and audits of
its 2004 and 2003 consolidated financial statements in accordance
with the standards of the Public Company Accounting Oversight
Board (United States).  Our opinions, based on our audits, are
presented below.

Consolidated financial statements and financial statement schedule
------------------------------------------------------------------

In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Cadiz Inc. and its subsidiaries at
December 31, 2005 and 2004, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 2005 in conformity with accounting principles
generally accepted in the United States of America. In addition,
in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.  These financial
statements and financial statement schedule are the
responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements and
financial statement schedule based on our audits.  We conducted
our audits of these statements in accordance with the standards
of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit of
financial statements includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern.  As discussed
in Note 2 to the financial statements, the Company has suffered
recurring losses from operations that raise substantial doubt
about its ability to continue as a going concern.  Management's
plans in regard to these matters are also described in Note 2.
The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

Internal control over financial reporting
-----------------------------------------

Also, in our opinion, management's assessment, included in
Management's Report on Internal Control Over Financial Reporting
appearing under Item 9A, that the Company maintained effective
internal control over financial reporting as of December 31,
2005 based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly
stated, in all material respects, based on those criteria.
Furthermore, in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2005, based on

                          Page 34

criteria established in Internal Control - Integrated Framework
issued by the COSO. The Company's management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting.  Our responsibility is to express
opinions on management's assessment and on the effectiveness of
the Company's internal control over financial reporting based on
our audit.  We conducted our audit of internal control over
financial reporting in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material
respects.  An audit of internal control over financial reporting
includes obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of
internal control, and performing such other procedures as we
consider necessary in the circumstances.  We believe that our
audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles.  A company's internal
control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use,
or disposition of the company's assets that could have a material
effect on the financial statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Los Angeles, California
March 16, 2006

                          Page 35



CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------
                                                YEAR ENDED DECEMBER 31,
                                               -------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)          2005      2004       2003
------------------------------------------------------------------------------

Total revenues                                $  1,197  $     47  $  3,162
                                              --------  --------  --------
Costs and expenses:
 Cost of sales                                     994         -     2,965
 General and administrative                      4,045     3,050     5,235
 Compensation costs from stock and
  option awards                                 16,687         -         -
 Write off of investment in subsidiary               -         -       195
 Reorganization costs                                -         -       655
 Write-off of permanent and developing crops         -     3,443         -
 Depreciation and amortization                     229       527       743
                                              --------  --------  --------

 Total costs and expenses                       21,955     7,020     9,793
                                              --------  --------  --------

Operating loss                                 (20,758)   (6,973)   (6,631)

Interest expense, net                            1,931     9,064     4,905
                                              --------  --------  --------

Net loss before income taxes                   (22,689)  (16,037)  (11,536)

Income tax expense                                 336         -         -
                                              --------  --------  --------

Net loss                                       (23,025)  (16,037)  (11,536)

Less:  Preferred stock dividends                     -         -       918
       Imputed dividend on preferred stock           -         -     1,600
                                              --------  --------  --------

Net loss applicable to common stock           $(23,025) $(16,037) $(14,054)
                                              ========  ========  ========
Basic and diluted net loss per share          $  (2.14) $  (2.32) $  (6.39)
                                              ========  ========  ========

Weighted-average shares outstanding             10,756     6,911     2,200
                                              ========  ========  ========

See accompanying notes to the consolidated financial statements.

                          Page 36



CONSOLIDATED BALANCE SHEET
------------------------------------------------------------------------
                                                     DECEMBER 31,
                                                     ------------
($ IN THOUSANDS)                                   2005       2004
------------------------------------------------------------------------

ASSETS

Current assets:
Cash and cash equivalents                        $  5,302  $  9,031
Accounts Receivable                                   170         -
Prepaid interest expense                              740     1,106
Prepaid expenses and other                             34       116
                                                 --------  --------
  Total current assets                              6,246    10,253


Property, plant, equipment and water
 programs, net                                     35,323    35,552
Goodwill                                            3,813     3,813
Other assets                                          664     1,453
                                                 --------  --------

  Total assets                                   $ 46,046  $ 51,071
                                                 ========  ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                $    369  $    470
 Accrued liabilities                                  819       743
 Current portion of long term debt                      8         -
                                                 --------  --------

  Total current liabilities                         1,196     1,213

Long-term debt                                     25,883    25,000
                                                 --------  --------
  Total liabilities                                27,079    26,213

Contingencies (Note 13)

Stockholders' equity:
 Series F convertible preferred stock -
  $.01 par value: 100,000 shares authorized,
  shares issued  and outstanding - 1,000 at
  December 31, 2005 and 1,000 at
  December 31, 2004                                     -         -
 Common  stock - $0.01 par value; 70,000,000
  shares authorized; shares issued and
  outstanding: 11,330,463 at December 31,
  2005 and 10,324,339  at December 31, 2004           114       103

Additional paid-in capital                        226,738   209,615
Accumulated deficit                              (207,885) (184,860)
                                                 --------  --------

  Total stockholders' equity                       18,967    24,858
                                                 --------  --------

  Total liabilities and stockholders' equity     $ 46,046  $ 51,071
                                                 ========  ========

See accompanying notes to the consolidated financial statements.

                          Page 37



CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------
                                                YEAR ENDED DECEMBER 31,
                                               -------------------------
($IN THOUSANDS)                                2005      2004       2003
------------------------------------------------------------------------------
Cash flows from operating activities:
 Net loss                                     $(23,025) $(16,037) $(11,536)
 Adjustments to reconcile net loss to
  net cash
  used for operating activities:
   Depreciation and amortization                   257     4,294     1,602
   Write off of unamortized deferred
    debt discount and loan fees                      -     1,369         -
   Write off of investment in subsidiary             -         -       195
   Stock issued for services                         -         -       550
   Compensation costs from stock and
    option awards                               16,687         -         -
   Compensation paid through settlement
    of note receivable from officer                  -         -       841
   Interest paid in common stock                     -         -        12
   Interest added to loan principal                851         -         -
   Net (gain)/loss on disposal of assets            42         -        43
   Write-off of permanent and
    developing crops                                 -     3,443         -
   Compensation charge for deferred
     stock units                                     -         -       152
   Changes in operating assets and
    liabilities:
    Decrease (increase) in accounts
     receivable                                   (170)        -     1,488
    Decrease (increase) in inventories               -         -    (3,043)
    Decrease (increase) in prepaid expenses
     and other                                   1,236       122      (216)
    (Decrease) increase in accounts payable       (101)     (386)    1,393
    (Decrease) increase in accrued
     liabilities                                   522      (454)    1,831
                                              --------  --------  --------

   Net cash used for operating activities       (3,701)   (7,649)   (6,688)
                                              --------  --------  --------

Cash flows from investing activities:
 Deconsolidation of subsidiary                       -         -    (1,019)
 Additions to property, plant and equipment        (68)       (8)     (140)
 Additions to developing crops                       -         -      (231)
 Loan to officer                                     -         -       181
 Decrease (increase) in restricted cash              -     2,142    (2,142)
                                              --------  --------  --------

   Net cash provided by (used for)
    investing activities                           (68)    2,124    (3,455)
                                              --------  --------  --------

Cash flows from financing activities:
 Net proceeds from issuance of stock                 -    21,274    10,304
 Proceeds from issuance of long-term debt           44         -       135
 Financing costs                                     -      (150)     (400)
 Proceeds from convertible note payable              -         -       200
 Net proceeds from short-term borrowings             -         -         -
 Principal payments on long-term debt               (4)  (10,000)       (7)
                                              --------  --------  --------

   Net cash provided by financing
     activities                                     40    11,124    10,232
                                              --------  --------  --------

Net increase in cash and cash equivalents       (3,729)    5,609       193

Cash and cash equivalents, beginning
 of period                                       9,031     3,422     3,229
                                              --------  --------  --------

Cash and cash equivalents, end of period      $  5,302  $  9,031  $  3,422
                                              ========  ========  ========

Non-cash financing and investing activities

Settlement of note receivable from officer    $      -  $      1  $    841
Common stock issued upon conversion of
 preferred stock                                     -         -    14,020
Issuance of preferred stock with
 loan extension                                      -         -     5,000
Issuance of common stock upon conversion
 of note payable                                     -         -       212
Issuance of common stock to prepay
 interest on term loan obligations                   -     2,400         -
Issuance of common stock for services
 accrued in prior year                             447       350         -
Exchange of deferred stock units for
 common stock                                        -       654     1,054
Interest added to loan principle                   851         -         -

See accompanying notes to the consolidated financial statements.

                          Page 38



CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
($ IN THOUSANDS)
--------------------------------------------------------------------------------
              PREFERRED STOCK   COMMON STOCK ADDITIONAL               TOTAL
              ---------------   ------------  PAID-IN  ACCUMULATED STOCKHOLDERS'
              SHARES   AMOUNT  SHARES  AMOUNT CAPITAL     DEFICIT     EQUITY
              ------   ------  ------  ------ -------     -------     ------

Balance as
 of December
 31, 2002           -  $  -  1,458,659  $ 15  $156,151   $(157,287)   $ (1,121)

Exchange of
 deferred stock
 units for
 common stock       -     -     26,027     -     1,054           -       1,054
Issuance of
 common stock
 for cash           -     -  4,112,000    41    10,239           -      10,280
Issuance of
 stock to
 lenders            -     -    168,000     2       430           -         432
Issuance of
 common stock
 for services       -     -    128,000     1       279           -         280
Exercise of
 warrants           -     -     94,000     1        23           -          24
Conversion of
 Series D and
 E convertible
 preferred stock    -     -    400,000     4    14,016           -      14,020
Conversion of
 convertible note
 payable            -     -     84,699     1       211           -         212
Beneficial
 conversion
 feature of
 note payable       -     -          -     -        90           -          90
Preferred stock
 dividend           -     -          -     -      (918)          -        (918)
Imputed dividend
 from warrants
 and deferred
 beneficial
 conversion
 feature            -     -          -     -    (1,600)          -      (1,600)
Issuance of
 Series F
 convertible
 preferred
 stock        100,000     1          -     -     4,999           -       5,000
Net loss            -     -          -     -         -     (11,536)    (11,536)
              -------  ----  ---------  ----  --------   ---------    --------

Balance as
 of December
 31, 2003     100,000     1  6,471,385    65   184,974    (168,823)     16,217

Exchange of
 deferred
 stock units
 for common
 stock              -     -      1,289     -       654           -         654
Issuance of
 common stock
 for cash           -     -  2,000,000    20    23,654           -      23,674
Issuance of
 common stock
 for services       -     -    140,000     1       349           -         350
Conversion of
 Series F
 convertible
 preferred
 stock        (99,000)   (1) 1,711,665    17       (16)          -           -
Net loss            -     -          -     -         -     (16,037)    (16,037)
              -------  ----  ---------  ----  --------   ---------    --------

Balance as
 of December
 31, 2004       1,000     - 10,324,339   103   209,615    (184,860)     24,858


Issuance of
 common stock
 for services       -     -     37,200     1       446           -         447
Issuance of
 management
 incentive
 shares and
 options            -     -    968,933    10    16,677           -      16,687
Fractional
 shares
 retired            -     -         (9)    -         -           -           -
Net loss            -     -          -     -         -     (23,025)    (23,025)
              -------  ----  ---------  ----  --------   ---------    --------

Balance as
 of December
 31, 2005       1,000  $  - 11,330,463  $114  $226,738   $(207,885)   $ 18,967
              =======  ==== ==========  ====  ========   =========    ========

See accompanying notes to the consolidated financial statements

                          Page 39



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS
--------------------------------

     The Company's primary asset consists of three blocks of
land in eastern San Bernardino County, California totaling
approximately 46,000 acres.  Virtually all of this land is
underlain by high-quality groundwater resources with demonstrated
potential for various applications, including water storage and
supply programs and recreational, residential, and agricultural
development.  Two of the three properties are located in
proximity to the Colorado River Aqueduct, the major source of
imported water for southern California.  The third property is
located near the Colorado River.

     The value of these assets derives from a combination of
projected population increases and limited water supplies
throughout southern California.  In addition, most of the major
population centers in southern California are not located where
significant precipitation occurs, requiring the importation of
water from other parts of the state.  We therefore believe that a
competitive advantage exists for companies that can provide high
quality, reliable, and affordable water to major population
centers.

     To this end, in 1997 we commenced discussions with the
Metropolitan Water District of Southern California
("Metropolitan") in order to develop a long-term agreement for a
joint venture groundwater storage and supply program on our land
in the Cadiz and Fenner valleys of eastern San Bernardino County
(the "Cadiz Project").  Under the Cadiz Project, surplus water
from the Colorado River would be stored in the aquifer system
underlying our land during wet years.  When needed, the stored
water, together with indigenous groundwater, could be returned to
the Colorado River Aqueduct for distribution to Metropolitan's
member agencies throughout six southern California counties.

     Between 1997 and 2002, Metropolitan and the Company received
substantially all of the various permits required to construct
and operate the project, including a federal Record of Decision
from the U.S. Department of Interior, which endorsed the Cadiz
Project and granted a right-of-way for construction of project
facilities.  The federal government also approved a Final
Environmental Impact Statement ("FEIS") in compliance with the
National Environmental Policy Act ("NEPA").

     Despite the significant progress made in the federal
environmental review process, in October 2002 Metropolitan's
Board refused to consider whether or not to certify the Final
Environmental Impact Report ("FEIR"), which was a necessary
action to authorize implementation of the Cadiz Project in
accordance with the California Environmental Quality Act
("CEQA").

     When Metropolitan's Board declined to proceed with the Cadiz
Project, the FEIR was complete and awaiting certification at a
hearing scheduled for late October 2002.  It is the Company's
position that Metropolitan's actions on October 8, 2002 breached
various contractual and fiduciary obligations of Metropolitan to
us, and interfered with the economic advantage the Company would
have obtained from the Cadiz Project.  Therefore, in April 2003
the Company filed a claim against Metropolitan seeking
compensatory and punitive damages.  When settlement negotiations
failed to produce a resolution, the Company filed a lawsuit
against Metropolitan in Los Angeles Superior Court on November
17, 2005.

                          Page 40

     Meanwhile, the need for new water storage and supply
programs in the southwestern United States has not diminished.
Over the five years preceding the 2004 - 2005 winter season, the
Colorado River watershed experienced a prolonged drought that
presented major challenges to the economies of California,
Nevada, and Arizona. The drought was followed by a wet year in
2005 during which surplus water was available to Metropolitan
that exceeded its storage capacity by approximately 200,000 acre-
feet.  Had the Cadiz Project been built, it could have
accommodated most of this available surplus.  As population
continues to grow at record rates, the Southwest is facing the
very real possibility that current and future supplies of water
will not be able to meet demand without more investment in water
infrastructure, including groundwater storage projects.

     To meet this need, the Company is committed to completing
the Cadiz Project and finalizing the state of California
environmental review. To that end the Company is now in advanced
discussions with a third party public agency that would assume
the role of CEQA lead agency and complete the California
environmental review process.  The Company is also working
directly with the U.S. Department of Interior to have the permits
that were granted during the federal environmental review
process, including the right-of-way granted in the Record of
Decision, issued directly to the Company.  Additionally, the
Company is in discussions with several other public agencies
regarding their interest in participating in the Cadiz Project.
All of these agencies have access to independent sources of
supply that can be stored by the Cadiz Project.

     Due to significant population growth in Southern
California, where the Company's properties are located, the
Company has also begun to explore additional uses of our land
assets. To this end, the Company has retained outside services to
conduct a detailed analysis of our land assets and assess the
opportunities for these properties.

     These objectives have different capital requirements and
implementation periods than those previously established.
Therefore, in 2002, we entered into a series of agreements with
our senior secured lender, ING Capital LLC ("ING") pursuant to
which we reduced our debt to ING to $25 million and extended the
maturity date of the ING debt until March 31, 2010, conditioned
upon a further principal reduction of $10 million on or before
March 31, 2008.  In addition, we raised approximately $35 million
in equity through private placements completed in 2003 and 2004.

     On January 30, 2003, the Company's wholly-owned subsidiary,
Sun World International, Inc. ("Sun World") and certain of its
subsidiaries (Sun Desert Inc., Coachella Growers, and Sun
World/Rayo) filed voluntary petitions for relief under Chapter 11
of the Bankruptcy Code. The filing was made in the United States
Bankruptcy Court, Central District of California, Riverside
Division.  Sun World sought bankruptcy protection in order to
access a seasonal financing package of up to $40 million to
provide working capital through the 2003-2004 growing seasons.
The financial statements of Sun World are no longer consolidated
with those of Cadiz due to the Company's loss of control over the
operations of Sun World on the Chapter 11 filing date.  Cadiz
also wrote off its net investment in Sun World of $195 thousand
on that date because it did not anticipate being able to recover
its investment.

     The four Sun World entities were the joint proponents of the
Debtors' Joint Plan of Reorganization Dated November 24, 2003
(the "Plan").  The Plan provided for the restructuring of Sun
World's balance sheet by providing for Sun World to issue equity
interests in the

                          Page 41

reorganized company to the holders of its First Mortgage Notes in
full satisfaction of their mortgage note claims; for the payment
in full of convenience claims and trade claims; and for Sun World
to issue equity interests in the reorganized company to entities
holding certain other unsecured claims in full satisfaction of
those claims.  The holders of Sun World's secured First Mortgage
Notes were unable to reach agreement on various Plan issues, and
the Plan as presented was not confirmable. Thereafter, following
an extensive marketing process, Sun World entered into, subject
to Court approval, an asset purchase agreement ("APA") in December
2004 with BDCM Opportunity Fund, L.P. ("BDCM""), " a major holder
of the First Mortgage Notes, under which BDCM would acquire
substantially all of Sun World's assets subject to overbids at a
Court authorized auction. Following the auction on January 13, 2005,
BDCM was declared the winning bidder and the Court approved on
January 14, 2005, an amended APA under which BDCM agreed to acquire
substantially all of Sun World's assets in exchange for cash and
credit consideration of $127,750,000, plus assumption of certain
liabilities totaling an estimated $14 million, including the
trade claims which approximate net book value as of December 31,
2004 of the assets sold. Thereafter, BDCM assigned its rights
under the APA to Sun World International LLC ("SWLLC"), a
subsidiary of BDCM. The agreement with SWLLC closed on February
28, 2005. Following closing of the transaction, Sun World filed
an amended Plan to distribute the remaining consideration left in
Sun World (estimated at approximately $50 million after interim
distributions/credits to the holders of First Mortgage Notes of
approximately $78 million upon closing as authorized by the
Court).

     On August 26, 2005, a Settlement Agreement between Cadiz, on
the one hand, and Sun World and three of Sun World's
subsidiaries, on the other hand, was approved by the U.S.
Bankruptcy Court, concurrently with the Court's confirmation of
the amended Plan.  The Settlement Agreement provides that
following the September 6, 2005 effective date of Sun World's
plan of reorganization, Cadiz will retain the right to utilize
the Sun World net operating loss carryovers (NOLs).  Sun World
Federal NOLs are estimated to be approximately $52 million.  If,
in any year from calendar year 2005 through calendar year 2011,
the utilization of such NOLs results in a reduction of Cadiz' tax
liability for such year, then Cadiz will pay to the Sun World
bankruptcy estate 25% of the amount of such reduction, and shall
retain the remaining 75% for its own benefit.  There is no
requirement that Cadiz utilize these NOLs during this
reimbursement period, or provide any reimbursement to the Sun
World bankruptcy estate for any NOLs used by Cadiz after this
reimbursement period expires.

     The amended Plan became effective on September 6, 2005, and
Cadiz has no further interest in the business and operations of
Sun World.

     With the bankruptcy of Sun World, our agricultural
operations are very limited.  Historically, we have leased our
Cadiz Valley farming property to Sun World and other third
parties.  In the fourth quarter of 2004, the lease with Sun World
expired.  We continue to lease to a third party approximately 160
acres of vineyards at our Cadiz Valley property.  The lease is
renewable on a year to year basis with annual revenues of
approximately $50,000.  In 2005 we also farmed 260 acres of
citrus crops.  We subcontracted the labor, harvesting and
marketing of the crop to third parties.  Annual revenues were
approximately $1.1 million.

     We remain committed to our land and water assets and we
continue to explore all opportunities for development of these
assets.  We cannot predict with certainty which of these various
opportunities will ultimately be utilized.

                          Page 42


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

BASIS OF PRESENTATION

     The financial statements of the Company have been prepared
using accounting principles applicable to a going concern, which
assumes realization of assets and settlement of liabilities in
the normal course of business.  The Company incurred losses of
$23.0 million and $16.0 million in 2005 and 2004, respectively,
had working capital of $5.1 million at December 31, 2005, and
used cash in operations of $3.7 million and $7.6 million in 2005
and 2004, respectively.

     As discussed in Note 1, on October 8, 2002, Metropolitan's
Board voted not to proceed with the Cadiz Project and thereby did
not consider acceptance of the terms and conditions of the right-
of-way grant.  The Company believes that by failing to complete
the environmental review process for the Cadiz Project, as
specified in the Principles of Agreement, Metropolitan violated
this contract.  On April 7, 2003, the Company filed an
administrative claim against Metropolitan, asserting the breach
of various obligations specified in the Company's Principles of
Agreement with Metropolitan, and subsequently filed a lawsuit
against Metropolitan with the Los Angeles Superior Court on
November 17, 2005.

     The Company remains committed to its water programs and it
continues to explore all opportunities for development of these
assets.  As further discussed in Note 1, exploratory discussions
have been initiated with representatives of governmental
organizations, water agencies, and private water users with
regard to their expressed interest in implementation of the Cadiz
Project.  However, at the present time, the Company does not have
a commitment from any of these parties for the implementation of
the Cadiz Project.

     In November 2004, the Company raised $21.3 million in cash
through a private sale of common stock, of which $10.0 million
was used to pay down long term debt.  Based on current forecasts,
the Company believes it has sufficient resources to fund
operations beyond December 2006.  The Company's current resources
do not provide the capital necessary to fund the water
development project should the Company be required to do so.
There is no assurance that additional financing (public or
private) will be available on acceptable terms or at all.  If the
Company issues additional equity securities to raise funds, the
ownership percentage of the Company's existing stockholders would
be reduced. New investors may demand rights, preferences or
privileges senior to those of existing holders of common stock.
If the Company cannot raise needed funds, it might be forced to
make further substantial reductions in its operating expenses,
which could adversely affect its ability to implement its current
business plan and ultimately its viability as a company.  These
financial statements do not include any adjustments that might
result from these uncertainties.

     As discussed in Note 1, subsequent to the effective date of
the Plan of reorganization of Sun World, the Company's primary
activities are limited to the development of its water resource
programs and related assets.  From the effective date of the Plan
of reorganization through December 31, 2005, the Company has
incurred losses of approximately $5.2 million and used cash in
operations of approximately $1.3 million.

                          Page 43

Principles of Consolidation

     The consolidated financial statements include the accounts
of the Company and those of Sun World until January 30, 2003, at
which date Sun World and certain of its subsidiaries (Sun Desert
Inc., Coachella Growers, and Sun World/Rayo) filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code. As
of that date, due to the Company's loss of control over the
operations of Sun World, the financial statements of Sun World
were no longer consolidated with those of Cadiz, but instead,
Cadiz accounted for its investment in Sun World on the cost basis
of accounting.  As a result of changing to the cost basis of
accounting on January 31, 2003, the Company had a net investment
in Sun World of $195,000 consisting of loans and other amounts
due from Sun World of $13,500,000 less losses in excess of
investment in Sun World of $13,305,000. The Company wrote off its
net investment in Sun World during the quarter ended March 31,
2003.

     In December 2003, the Company transferred substantially all
of its assets (with the exception of our office sublease, certain
office furniture and equipment and any Sun World related assets)
to Cadiz Real Estate LLC, a Delaware limited liability company
("Cadiz Real Estate").  The Company holds 100% of the equity
interests of Cadiz Real Estate, and therefore continues to hold
100% beneficial ownership of the properties that it transferred
to Cadiz Real Estate.  Because the transfer of the Company's
properties to Cadiz Real Estate has no effect on its ultimate
beneficial ownership of these properties, the properties owned of
record either by Cadiz Real Estate or by the Company are treated
as belonging to the Company.

ONE-FOR-25 REVERSE STOCK SPLIT

     In December 2003, the Company effected a one-for-25 reverse
stock split.  All share and per share information in the
accompanying financial statements have been retroactively
restated to reflect the effect of this stock split.

USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

     The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  In preparing these financial statements, management has
made estimates with regard to revenue recognition, goodwill and
other long-lived assets, and deferred tax assets.  Actual results
could differ from those estimates.

REVENUE RECOGNITION

     The Company recognizes crop sale revenue upon shipment and
transfer of title to customers.  Prior to the deconsolidation of
Sun World, packing revenues and marketing commissions from third
party growers were recognized when the related services were
provided.  Proprietary product development revenues were
recognized based upon product sales by licensees.  Project
development and management fees were recorded when earned under
the terms of the related agreement.

                          Page 44

     Sun World revenues attributable to one national retailer
totaled $0.1 million (2.2%) for the month ended January 31, 2003.
Revenues attributable to another national retailer totaled $0.5
million (16.6%) for the month ended January 31, 2003.  Sun World
export sales accounted for approximately 6.1% of revenues for the
month ended January 31, 2003. Services and license revenues were
less than 10% of total revenues for the year ended December 31,
2003.

RESEARCH AND DEVELOPMENT

     Prior to the deconsolidation of Sun World, the Company
incurred costs to research and develop new varieties of
proprietary products.  Research and development costs were
expensed as incurred.  Such costs incurred by Sun World were
approximately $183,000 for the month ended January 31, 2003, and
are included in general administrative expenses in the statement
of operations.

NET LOSS PER COMMON SHARE

     Basic Earnings Per Share (EPS) is computed by dividing the
net loss, after deduction for preferred dividends either accrued
or imputed, if any, by the weighted-average common shares
outstanding.  Options, deferred stock units, warrants, and
participating and redeemable preferred stock convertible into or
exercisable for certain shares of the Company's common stock,
were not considered in the computation of diluted EPS because
their inclusion would have been antidilutive.  Had these
instruments been included, the fully diluted weighted average
shares outstanding would have increased by approximately 725,000
shares, 68,000 shares, and 125,000 shares for the years ended
December 31, 2005, 2004 and 2003, respectively.

STOCK-BASED COMPENSATION

     As permitted under Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation" as amended by SFAS 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure", the Company has elected
to follow Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" in accounting for its stock
options and other stock-based employee awards.  Pro forma
information regarding net loss and loss per share, as calculated
under the provisions of SFAS 123, are disclosed in the table
below.  The Company accounts for equity securities issued to non-
employees in accordance with the provisions of SFAS 123 and
Emerging Issues Task Force 96-18.

     Had compensation cost for these plans been determined using fair
value the Company's net loss and net loss per common share would
have increased to the following pro forma amounts (dollars in
thousands except per share amounts):

                          Page 45

                                        YEAR ENDED DECEMBER 31,
                                        -----------------------
                                       2005      2004       2003
                                       ----      ----       ----
 Net loss applicable to common stock:
      As reported                     $(23,025) $(16,037) $(14,054)
      Additional expense under
       SFAS 123                       $ (3,096)        -      (150)
                                      --------  --------  --------
      Pro forma                       $(26,121) $(16,037) $(14,204)
                                      ========  ========  ========
 Net loss per common share:
      As reported                     $  (2.14) $  (2.32) $  (6.39)
      Additional expense under
       SFAS 123                       $  (0.29) $      -  $  (0.07)
                                      --------  --------  --------
      Pro  forma                      $  (2.43) $  (2.32) $  (6.46)
                                      ========  ========  ========

CASH AND CASH EQUIVALENTS

     The Company considers all short-term deposits with an
original maturity of three months or less to be cash equivalents.
The Company invests its excess cash in deposits with major
international banks, government agency notes and short-term
commercial paper and, therefore, bears minimal risk.  Such
investments are stated at cost, which approximates fair value,
and are considered cash equivalents for purposes of reporting
cash flows.

PREPAID INTEREST EXPENSE

     As part of the private sale of common shares on November 30,
2004, the Company issued to its lender $2.4 million of units as
prepaid interest under the Company's $25 million borrowing from
ING. The current portion of this interest is included in Prepaid
Interest Expense and the non-current portion is included in Other
Assets in the Consolidated Balance Sheet.  The total amount of
prepaid interest was $1,284,000 and $2,400,000 on December 31,
2005 and 2004, respectively.

PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS

     Property, plant, equipment and water programs are stated at
cost.

     The Company capitalized direct and certain indirect costs of
planting and developing orchards and vineyards during the
development period, which varied by crop and generally ranged
from three to seven years.  Depreciation commenced in the year
commercial production was achieved.

     Permanent land development costs, such as acquisition costs,
clearing, initial leveling and other costs required to bring the
land into a suitable condition for general agricultural use, were
capitalized and not depreciated, since these costs were
determined to have an indefinite useful life.

     Depreciation is provided using the straight-line method over
the estimated useful lives of the assets, generally ten to forty-
five years for land improvements and buildings, three to twenty-
five years for machinery and equipment, and five to thirty years
for permanent crops.

                          Page 46

     Water rights and water storage and supply programs are
stated at cost.  All costs directly attributable to the
development of such programs are being capitalized by the
Company.  These costs, which are expected to be recovered through
future revenues, consist of direct labor, drilling costs,
consulting fees for various engineering, hydrological,
environmental and feasibility studies, and other professional and
legal fees.

IMPAIRMENT OF LONG-LIVED ASSETS

     The Company evaluates its long-lived assets, including
intangibles, for potential impairment when circumstances indicate
that the carrying amount of the asset may not be recoverable.
This evaluation is based upon estimated future cash flows. In the
event that the undiscounted cash flows are less than the net book
value of the assets, the carrying value of the assets will be
written down to their estimated fair value.  As a result of the
actions taken by Metropolitan in the fourth quarter of 2002 as
described in Note 1, the Company, with the assistance of a
valuation firm, evaluated the carrying value of its water program
and determined that the asset was not impaired and that the costs
were estimated to be recovered through implementation of the
Cadiz Project with other government organizations, water agencies
and private water users.  In 2005, 2004 and 2003 the Company
reviewed the valuation of the its water program and concluded
that the carrying amount of the program was not impaired.  The
Company's estimate could be impacted by changes in plans related
to the Cadiz Project.

     Permanent crops and developing crops shown as Cadiz assets
consist of lemon groves and grape vineyards located on the Cadiz
Valley property.  These crops have previously been leased to Sun
World and an unaffiliated third party.  During the fourth quarter
of the year ended December 31, 2004, the long-standing lease to
Sun World was terminated.  In 2005, an independent third party
leased the vineyards, and the company farmed the 2005 citrus
crop.  The vineyard leases do not generate a significant amount
of revenue, and the future profitability of lemon farming
operations is uncertain.  Due to the uncertainty of recovering
the carrying value of the permanent and developing crops, the
Company recorded a charge of $3.4 million in 2004 to write off
the capitalized cost of these crops, which is shown under the
heading "Write-off of permanent and developing crops" on the
Consolidated Statement of Operations.

GOODWILL AND OTHER ASSETS

     As a result of a merger in May 1988 between two companies,
which eventually became known as Cadiz Inc., goodwill in the
amount of $7,006,000 was recorded.  Approximately $3,193,000 of
this amount was amortized prior to the adoption of Statement of
Financial Accounting Standards No. 142, ("SFAS No. 142")
"Goodwill and Other Intangible Assets" on January 1, 2002.
Goodwill is tested for impairment annually in the first quarter
of each year, or if events occur which require an impairment
analysis be performed.  As a result of the actions taken by
Metropolitan in the fourth quarter of 2002 as described in Note
1, the Company, with the assistance of a valuation firm,
performed an impairment test of its goodwill and determined that
its goodwill was not impaired.  In addition, the Company,
performed its annual impairment test of goodwill in the first
quarter of 2005, 2004 and 2003 and determined that the goodwill
was not impaired.

                          Page 47

     Capitalized loan fees represent costs incurred to obtain
debt financing.  Such costs are amortized over the life of the
related loan.  At December 31, 2005 and 2004, the capitalized
loan fees relate to costs incurred in connection with the ING
loan described in Note 6.

INCOME TAXES

     Income taxes are provided for using an asset and liability
approach which requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of
temporary differences between the financial statement and tax
bases of assets and liabilities at the applicable enacted tax
rates.  A valuation allowance is provided when it is more likely
than not that some portion or all of the deferred tax assets will
not be realized.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     Financial assets with carrying values approximating fair
value include cash and cash equivalents and accounts receivable.
Financial liabilities with carrying values approximating fair
value include accounts payable and accrued liabilities due to
their short-term nature.  The carrying value of the Company's
debt approximates fair value, based on interest rates currently
available to the Company for debt with similar terms.

SUPPLEMENTAL CASH FLOW INFORMATION

     Cash paid for interest during the years ended December  31,
2004 and 2003 was $3,970,000 and $3,913,000, respectively.  As
described in Note 2, cash interest payments due on the ING loan
in the year ended December 31, 2005 were credited against a $2.4
million prepaid interest account that had been established for
this purpose.  No cash was paid for income taxes during the years
ended December 31, 2005, 2004 and 2003, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2004, the FASB revised Statement No. 123 (FAS
123R), "Share-Based Payment", which requires companies to expense
the estimated fair value of employee stock options and similar
awards.  On April 14, 2005, the U.S. Securities and Exchange
Commission adopted a new rule amending the compliance dates for
FAS 123R.  In accordance with the new rule, the accounting
provisions of FAS 123R will be effective for the Company
beginning in the first quarter of fiscal 2006.  The Company
tentatively expects to adopt the provisions of FAS123R using a
modified prospective application.  FAS 123R, which provides
certain changes to the method of valuing share-based compensation
among other changes, will apply to new awards and to awards that
are outstanding on the effective date and are subsequently
modified or cancelled.  Compensation expense for outstanding
awards for which the requisite service had not been rendered as
of the effective date will be recognized over the remaining
service period using the compensation cost calculated for pro
forma disclosure purposes under FAS 123.  The Company will incur
additional expense during fiscal 2006 related to new awards granted
during 2006 that cannot yet be quantified.  The Company is in the
process of determining how the guidance regarding value share-
based compensation as prescribed in FAS 123R will be applied to
value share-based awards granted after the effective date and the
impact that the recognition of compensation expense related to
such awards will have on its financial statements.

                          Page 48

     In December 2004, the FASB issued SFAS No. 153, "Exchange of
Nonmonetary Assets, an amendment of APB Opinion No. 29." SFAS No.
153 is based on the principle that exchanges of nonmonetary
assets should be measured based on the fair value of the assets
exchanged.  APB Opinion No. 29, "Accounting for Nonmonetary
Transactions," provided an exception to its basic measurement
principle (fair value) for exchanges of similar productive
assets.  Under APB Opinion No. 29, an exchange of a productive
asset for a similar productive asset was based on the recorded
amount of the asset relinquished.  SFAS No. 153 eliminates this
exception and replaces it with an exception of exchanges of
nonmonetary assets that do not have commercial substance.  The
Company has concluded that SFAS No. 153. will not have a material
impact on its consolidated financial statements.

     In March 2005, the FASB issued FIN 47, "Accounting for
Conditional Asset Retirement Obligations," an interpretation of
SFAS 143.  This statement clarified the term conditional asset
retirement obligation and is effective for the Company's fourth
quarter ending December 31, 2005.  Adoption of FIN 47 did not
have an impact on the Company's consolidated financial
statements.


NOTE 3 - PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS
------------------------------------------------------

     Property, plant, equipment and water programs consist of the
following (dollars in thousands):
                                                  DECEMBER 31,
                                                 2005       2004
                                                 ----       ----

          Land and land improvements           $ 21,986  $ 22,010
          Water programs                         14,274    14,274
          Buildings                               1,191     1,408
          Machinery and equipment                 2,103     3,599
                                               --------  --------
                                                 39,554    41,291
          Less accumulated depreciation          (4,231)   (5,739)
                                               --------  --------
                                               $ 35,323  $ 35,552
                                               ========  ========

     Depreciation expense during the years ended December 31,
2005, 2004 and 2003 was $229,000, $527,000 and $683,000
respectively.

     Prior to 2005, all permanent crops and developing crops
shown as Cadiz assets were leased to Sun World and to an
unaffiliated third party.  In the fourth quarter of the year
ended December 31, 2004, the lease of the Cadiz Valley farming
property to Sun World terminated.  Based on the uncertainty as to
possible recovery of the carrying value of the permanent crops
and developing crops on this property, during the last quarter of
2004 the Company wrote off $3.4 million, net of depreciation, of
permanent and developing crops at this property.

                          Page 49


NOTE 4 - OTHER ASSETS
---------------------

       Other   assets  consist  of  the  following  (dollars   in
thousands):

                                                   DECEMBER 31,
                                                 2005       2004
                                                 ----       ----

          Deferred loan costs, net             $    120  $    148
          Prepaid interest                          544     1,294
          Property tax refund receivable              -        11
                                               --------  --------
                                               $    664  $  1,453
                                               ========  ========

     Amortization expense of deferred loan costs was $28,000,
$3,767,000 and $641,000 in 2005, 2004, and 2003, respectively,
and is included in interest expense in the statement of
operations.  Amortization expense included in the consolidated
financial statements for Sun World's capitalized trademark
development was $60,000 in 2003.


NOTE 5 - ACCRUED LIABILITIES
----------------------------

     Accrued liabilities consist of the following (dollars in
thousands):

                                                  DECEMBER 31,
                                                 2005       2004
                                                 ----       ----

          Interest                             $    264  $    172
          Payroll, bonus, and benefits                4       142
          Consulting and Legal expenses              65       326
          Income & other taxes                      336         -
          Other expenses                            150       103
                                               --------  --------
                                               $    819  $    743
                                               ========  ========

NOTE 6 - LONG-TERM DEBT
-----------------------

     At December 31, 2005 and 2004, the carrying amount of the
Company's outstanding debt is summarized as follows (dollars in
thousands):

                                                  DECEMBER 31,
                                                 2005       2004
                                                 ----       ----
   Senior term bank loan, interest payable
    semi-annually, interest per annum at 4%
    in cash plus 4% paid in kind until
    March 31, 2008 and 4% in cash plus 6%
    paid in kind March 31, 2010                $ 25,851  $ 25,000


   Other unsecured loans                             40         -
                                               --------  --------
                                                 25,891    25,000

  Less current portion                                8         -
                                               --------  --------
                                               $ 25,883  $ 25,000
                                               ========  ========

                          Page 50

     Pursuant to the Company's loan agreements, annual maturities
of long-term debt outstanding on December 31, 2005 are as
follows:

                    YEAR          $000'S
                    ----          ------

                    2006         $      8
                    2007                9
                    2008           10,009
                    2009                9
                    2010           15,856
                                 --------
                                 $ 25,891
                                 ========

     The senior term bank loan, which previously consisted of a
revolving credit facility and a term loan, had an outstanding
balance of $25,851,000 and $25,000,000 at December 31, 2005 and
2004, respectively.  The senior term bank loan was due on January
31, 2003 and, through various amendment and extensions, is now
due on March 31, 2010, with a $10 million mandatory principal
repayment due on or before March 31, 2008.

     In February 2002, the Company completed an amendment to the
senior term bank facility that extended the maturity date of the
obligation to January 31, 2003.  The interest rate could either
be LIBOR plus 300 basis points if paid in cash or LIBOR plus 700
basis points if paid in common stock.  In March 2002, the
revolving credit facility was increased from $15 million to $25
million, with $10 million of the $25 million revolver convertible
into 1,250,000 of the Company's common stock any time prior to
January 2003 at the election of the lender.  In connection with
obtaining the extension of the term loan and revolver and the
increase in the revolver, the Company repriced certain warrants
previously issued and issued certain additional warrants to
purchase shares of the Company's common stock. The estimated fair
value of the warrants issued and repriced was calculated using
the Black Scholes option pricing model and was recorded as a debt
discount and was being amortized over the remaining term of the
loan.

     The Company failed to pay off the senior term bank loan on
its maturity date of January 31, 2003 and on February 13, 2003,
the lender delivered to the Company a Notice of Default and
Demand for Payment.

     On December 15, 2003, the Company entered into an amendment
of its senior term loan and revolving credit facility to extend
the maturity date through March 31, 2005 and was entitled to
obtain further extensions through September 30, 2006, by
maintaining sufficient balances, among other conditions, in a
cash collateral account with the lender.  The maximum aggregate
amount to be outstanding under the amended credit facility was
$35 million plus accrued interest.  The amendment of the credit
facility did not constitute a troubled debt restructuring and was
accounted for as a debt modification under EITF 96-19.  In
connection with this amendment, the Company;

     *  paid the lender $2,425,034 representing; (i) accrued
        interest through September 30, 2003 of $1,412,457 at the
        non default interest rate; (ii) accrued interest through
        September 30, 2003 of $612,577 at the default rate of
        interest; and (iii) $400,000 in fees;

                          Page 51

     *  issued to the lender 100,000 shares of series F Preferred
        stock initially convertible into 1,728,955 shares of
        common stock; and

     *  deposited $2,142,280 in the cash collateral account with
        the lender representing prepaid interest through March 31,
        2005.

     The estimated value of the Series F preferred stock of $5
million was recorded as a debt discount and was being amortized
over the initial term of the note through March 31, 2005.

     Interest under the amended credit facilities was payable
semiannually at the Company's option in either cash at 8% per
annum, or in cash and paid in kind ("PIK"), at 4% per annum for
the cash portion and 8% per annum for the PIK portion.  The PIK
portion was to be added to the outstanding principal balance.


     On November 30, 2004 the Company entered into another
amendment of its senior term loan agreement with ING.  The
amendment of the credit facility did not constitute a troubled
debt restructuring and was accounted for as a debt extinguishment
under EITF 96-19.  Pursuant to this amendment, the Company;

     *  repaid in full the senior term loan portion of the
        facility with ING of $10 million and reduced to $25
        million the outstanding principal balance under the existing
        revolving portion of the loan;

     *  amended the terms and conditions of the loan facility
        with ING in order to:

        (i) extend the maturity date of the debt until March 31,
            2010, conditioned upon a further principal reduction of
            $10 million on or before March 31, 2008, and

        (ii)reduce the interest rate through March 31, 2008 on
            the new outstanding balance to 4% cash plus 4% PIK
            (increasing to 4% cash plus 6% PIK for interest periods
            commencing on and after April 1, 2008).

     *  wrote off of the remaining $1.4 million in unamortized
        financing costs associated with the loan under the terms
        applicable as of the previous, December 2003, amendment.

     The terms of the amended loan facilities also require
certain mandatory prepayments from the cash proceeds of future
equity issuances by the Company and prohibit the payment of
dividends.

     The senior term loan is collateralized by substantially all
of the assets of the Company.  At December 31, 2005 the Company
was in compliance with its debt covenants.

                          Page 52


NOTE 7 - CONDENSED CONSOLIDATING FINANCIAL INFORMATION
-----------------------------------------------------

     Condensed consolidating financial information for the year
ended December 31, 2003 for the Company are presented below (in
thousands).  The condensed consolidating financial information
for 2003 include the accounts of the Company and those of Sun
World until January 30, 2003, at which time Sun World was no
longer consolidated. No consolidating balance sheet information
for 2003 and no consolidating financial information for 2004 and
2005 are presented, as the consolidated financial statements
include only the results of Cadiz due to the deconsolidation of
Sun World on January 30, 2003.

                          Page 53

CONSOLIDATING STATEMENT
OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 2003
                          CADIZ   SUN WORLD   ELIMINATIONS   CONSOLIDATED
                          -----   ---------   ------------   ------------
Revenues                 $    303  $  3,005     $   (146)       $  3,162
                         --------  --------     --------        --------
Costs and expenses:
  Cost of sales               333     2,653          (21)          2,965
  General and
   administrative           4,653       707         (125)          5,235
  Write off of investment
   in subsidiary              195         -            -             195
  Reorganization Costs          -       655            -             655
  Depreciation and
   amortization               553       190            -             743
                         --------  --------     --------        --------

  Total costs and
   expenses                 5,734     4,205         (146)          9,793
                         --------  --------     --------        --------

Operating loss             (5,431)   (1,200)           -          (6,631)

Loss from subsidiary       (2,469)        -        2,469               -
Interest expense, net       3,636     1,269            -           4,905
                         --------  --------     --------        --------

Loss before income taxes  (11,536)   (2,469)       2,469         (11,536)

Income tax expense              -         -            -               -
                         --------  --------     --------        --------

 Net loss                 (11,536)   (2,469)       2,469         (11,536)

Less: Preferred stock
       dividends             (918)        -            -            (918)
      Imputed dividend
       on preferred stock  (1,600)        -            -          (1,600)
                         --------  --------     --------        --------

Net loss applicable to
 common stock            $(14,054) $ (2,469)    $  2,469        $(14,054)
                         ========  ========     ========        ========


CONSOLIDATING STATEMENT OF
CASH FLOW INFORMATION
YEAR ENDED DECEMBER 31, 2003
                          CADIZ   SUN WORLD   ELIMINATIONS   CONSOLIDATED
                          -----   ---------   ------------   ------------
Net cash used for
 operating activities    $ (4,881) $ (1,703)    $      -        $ (6,584)
                         --------  --------     --------        --------

Cash flows from investing
 activities:
 Disposal of subsidiary         -    (1,019)           -          (1,019)
 Additions to property,
  plant and equipment           -      (140)           -            (140)
 Additions to developing
  crops                       (34)     (197)           -            (231)
 Payment of loan to
  officer                     181         -            -             181
 Increase in restricted
  cash                     (2,142)        -            -          (2,142)
 (Increase) decrease in
  other assets                  5      (109)           -            (104)
                         --------  --------     --------        --------

Net cash used for
 investing activities      (1,990)   (1,465)           -          (3,455)
                         --------  --------     --------        --------

Cash flows from
 financing activities:
 Proceeds from issuance
  of long-term  debt            -       135            -             135
 Net proceeds from
  issuance of stock        10,304         -            -          10,304
 Financing costs             (400)        -            -            (400)
 Proceeds from
  convertible note
  payable                     200         -            -             200
 Principal payments
  on long-term  debt            -        (7)           -              (7)
                         --------  --------     --------        --------

Net cash provided by
 financing activities      10,104       128            -          10,232
                         --------  --------     --------        --------

Net increase (decrease)
 in cash and cash
 equivalents                3,233    (3,040)           -             193

Cash and cash
 equivalents, beginning
 of period                    189     3,040            -           3,229
                         --------  --------     --------        --------

Cash and cash
 equivalents, end
 of period               $  3,422  $      -     $      -        $  3,422
                         ========  ========     ========        ========

                          Page 54

NOTE 8 - INCOME TAXES
---------------------

     Deferred taxes are recorded based upon differences between
the financial statement and tax bases of assets and liabilities
and available carryforwards.  Temporary differences and
carryforwards which gave rise to a significant portion of
deferred tax assets and liabilities as of December 31, 2005 and
2004 are as follows (in thousands):

                                                   DECEMBER 31,
                                                 2005       2004
                                                 ----       ----
          Deferred tax assets:
            Net operating losses               $ 22,763  $ 36,238
            Fixed asset basis difference          8,037     8,049
            Contributions carryover                   -        35
            Accrued liabilities and other           814        61
                                               --------  --------

               Total deferred tax assets         31,614    44,383

            Valuation allowance for deferred
             tax assets                        (31,614)   (44,383)
                                               --------  --------

               Net deferred tax asset          $      -  $      -
                                               ========  ========

     The valuation allowance decreased $12,769,000 in 2005,
primarily due to a decrease in the net operating loss category of
deferred tax assets and increased $623,000 in 2004 due to an
increase in the deferred tax assets.

     As of December 31, 2005, the Company had net operating loss
(NOL) carryforwards of approximately $67 million for federal
income tax purposes.  Such carryforwards expire in varying
amounts through the year 2025.  This amount reflects the
effective reduction of the NOL carryforward as a result of
ownership change annual limitation amounts.

     On August 26, 2005, a Settlement Agreement between Cadiz, on
the one hand, and Sun World and three of Sun World's
subsidiaries, on the other hand, was approved by the U.S.
Bankruptcy Court, concurrently with the Court's confirmation of
the amended Plan.  The Settlement Agreement provides that
following the September 6, 2005 effective date of Sun World's
plan of reorganization, Cadiz will retain the right to utilize
the Sun World net operating loss carryovers (NOLs).  Sun World
Federal NOLs are estimated to be approximately $52 million.  If,
in any year from calendar year 2005 through calendar year 2011,
the utilization of such NOLs results in a reduction of Cadiz' tax
liability for such year, then Cadiz will pay to the Sun World
bankruptcy estate 25% of the amount of such reduction, and shall
retain the remaining 75% for its own benefit.  There is no
requirement that Cadiz utilize these NOLs during this
reimbursement period, or provide any reimbursement to the Sun
World bankruptcy estate for any NOLs used by Cadiz after this
reimbursement period expires.

     Because it is more likely than not that the Company will not
realize its net deferred tax assets, it has recorded a full
valuation allowance against these assets.  Accordingly, no
deferred tax asset has been recorded in the accompanying balance
sheet.

     Section 382 of the Internal Revenue Code imposes an annual
limitation on the utilization of net operating loss carryforwards
based on a statutory rate of return (usually the "applicable

                          Page 55

federal funds rate", as defined in the Internal Revenue Code) and
the value of the corporation at the time of a "change of
ownership" as defined by Section 382.  Due to past equity
issuances and equity issuances in 2005, and due to the Chapter 11
filing by Sun World, the Company's ability to utilize net
operating loss carryforwards is limited to approximately $7
million annually, potentially adjusted by built-in gain terms.

     A reconciliation of the income tax benefit to the statutory
federal income tax rate is as follows (dollars in thousands):


                                        YEAR ENDED DECEMBER 31,
                                        ----------------------
                                       2005      2004       2003
                                       ----      ----       ----

     Expected federal income tax
      benefit at 34%                 $ (7,714) $ (5,453) $ (3,922)
     Loss with no tax benefit
      provided                          1,672     1,993     3,900
     Federal AMT refund                     -         -         -
     State income tax                     336         2         2
     Amortization/write off of
      debt discount                         -     1,614         -
     Stock Options                      4,020         -         -
     Losses utilized against
      unconsolidated subsidiary
      taxable income                    2,012     1,837         -
     Other non-deductible expenses         10         7        20
                                     --------  --------  --------

       Income tax expense (benefit)  $    336  $      -  $      -
                                     ========  ========  ========


NOTE 9 - EMPLOYEE BENEFIT PLANS
------------------------------

     The Company has a 401(k) Plan for its salaried employees.
Employees must work 1,000 hours and have completed one year of
service to be eligible to participate in this plan.  The Company
matches 75% of the first four percent deferred by an employee up
to $1,600 per year.  The Company contributed $22,000, $3,000 and
$12,000 to the plans for fiscal years 2005, 2004 and 2003,
respectively. Contributions include those made under Sun World
plans for its employees for January 2003.


NOTE 10 - PREFERRED AND COMMON STOCK
-----------------------------------

SERIES F CONVERTIBLE PREFERRED STOCK

     The Company has an authorized class of 100,000 shares of
$0.01 par value Series F Convertible preferred stock ("Series F
Preferred Stock").  On December 15, 2003, the Company issued
100,000 shares of Series F Convertible Preferred Stock in
conjunction with the extension of the Company's senior term
loan's maturity date.  The 100,000 preferred shares were
initially convertible into 1,728,955 shares of Common Stock of
the Company.  The holders of the Preferred Stock are entitled to
receive dividends as if the shares had been converted to Common
Stock if dividends are paid on the Company's common stock.  The
Series F Preferred Stock may not be redeemed by the Company.  The
estimated value of the Series F Preferred Stock was recorded as a
debt discount and was being amortized over the initial term of
the senior term loans through March 31, 2005.  However, when the
senior term loans were amended on November 30, 2004, the
remaining debt discount of $1.4 million was written off.

                          Page 56

On November 30, 2004, 99,000 shares of the Series F Preferred
Stock were converted into 1,711,665 shares of Common Stock of the
Company leaving 1,000 shares of the Series F Preferred Stock
outstanding.

SERIES D CONVERTIBLE PREFERRED STOCK

     On December 29, 2000, the Company issued 5,000 shares of
Series D Convertible Preferred Stock ("Series D Preferred Stock")
for $5,000,000.  The holders of the Preferred Stock were entitled
to receive dividends, payable semi-annually, at a rate of 7% if
paid in cash or 9% if paid in the Company's common stock.  The
Series D Preferred Stock was initially convertible into 25,000
shares of the Company's common stock any time prior to July 2004
at the election of the holder.  The Company also had the right to
convert the Series D Preferred Stock, but only when the closing
price of the Company's common stock had exceeded $300 per share
for 30 consecutive trading days.  Holders were entitled to a
liquidation preference equal to the initial purchase of $1,000
per share plus any accrued and unpaid dividends.  The Series D
Preferred Stock would be redeemable in July 2004 if still
outstanding.  In 2003, all outstanding shares of Series D
preferred stock were exchanged for common stock as further
described below.

     The Company issued certain warrants to purchase shares of
the Company's common stock in connection with the issuance of the
Series D Preferred Stock.  The fair market value of the Company's
common stock at the time of issuance was above the accounting
conversion price resulting in an imputed dividend (beneficial
conversion feature).  The estimated fair value of the warrants
issued (calculated using the Black Scholes option pricing model)
and the imputed dividend totaled $1,050,000 which was recorded as
a discount to the Series D Preferred Stock.  The discount was
amortized through the redemption date of the stock and treated as
a reduction to earnings for earnings per share calculations.
Upon exchange of the Series D Preferred Stock for common stock in
October 2003, the unamortized beneficial conversion feature was
charged against paid in capital.

SERIES E-1 AND E-2 CONVERTIBLE PREFERRED STOCK

     During the fourth quarter of 2001, the Company issued 3,750
shares of Series E-1 Convertible Preferred Stock and 3,750 shares
of Series E-2 Convertible Preferred Stock (the "Series E
Preferred Stock") for an aggregate of $7,500,000.  The holders of
the Series E Preferred Stock are entitled to receive dividends,
payable semi-annually, at a rate of 7% if paid in cash or 9% if
paid in the Company's common stock.  The Series E Preferred Stock
was convertible into 40,000 shares of the Company's common stock
any time prior to July 2004 at the election of the holder.  The
Company also had the right to convert the Series E Preferred
Stock, but only when the closing price of the Company's common
stock had exceeded $262 per share for 30 consecutive trading
days.  Holders were entitled to a liquidation preference equal to
the initial purchase of $1,000 per share plus any accrued and
unpaid dividends.  The Series E Preferred Stock would be
redeemable in July 2004 if still outstanding.  In 2003, all
outstanding shares of Series E preferred stock were exchanged for
common stock as further described below.

     The Company issued 1,600 shares of the Company's common
stock and certain warrants to purchase shares of the Company's
common stock in connection with the issuance of the Series E
Preferred Stock.  The fair market value of the Company's common
stock at the

                          Page 57

time of issuance was above the accounting conversion price
resulting in an imputed dividend (beneficial conversion
feature).  The estimated fair value of the warrants issued
(calculated using the Black Scholes option pricing model) and the
imputed dividend totaled $1,614,000 which was recorded as a
discount to the Series E-1 and Series E-2 Preferred Stock.  The
discount is being amortized through the redemption date of the
stock and treated as a reduction to earnings for earnings per
share calculations. Upon exchange of the Series E Preferred Stock
for common stock in October 2003, the unamortized beneficial
conversion feature was charged against paid in capital.

     On October 15, 2002, the Company and preferred stockholders
agreed to amend the Certificates of Designations of Series D,
Series E-1 and Series E-2 Preferred Stock to (i) reduce the
conversion price from $200 per share for the Series D Preferred
Stock and from $187.50 per share for Series E Preferred Stock to
$131.25 per share for both Series D and Series E Preferred Stock;
and (ii) extend the redemption date to July 16, 2006.  With the
assistance of a valuation firm, the Company determined that the
additional value associated with the reduction in the conversion
price was offset by the extension of the redemption date and that
there was no loss or gain attributable to the amendment to the
Certificates of Designations.

     On October 20, 2003, the Company and the preferred
stockholders entered into an agreement to (i) exchange all
outstanding shares of Series D Preferred Stock, plus accrued and
unpaid dividends, for an aggregate of 320,000 shares of common
stock; and (ii) exchange all outstanding shares of series E
Preferred Stock, plus accrued and unpaid dividends, for an
aggregate of 80,000 shares of common stock.  In connection with
this conversion, the Company recorded a charge of $42,000 against
paid in capital as an inducement to convert.  At this time the
Company also recorded the unamortized beneficial conversion
feature of the Series D and Series E Preferred Stock as a charge
against paid in capital.

COMMON STOCK AND WARRANTS

     On November 30, 2004, the Company completed a private
placement of 400,000 Units at the price of $60.00 per Unit.  Each
Unit consisted of five (5) shares of the Company's common stock
and one (1) common stock purchase warrant.  Each Warrant will
entitle the holder to purchase, commencing 180 days from the date
of issuance, one (1) share of common stock at an exercise price
of $15.00 per share.  Each Warrant has a term of three (3) years,
but will be callable at $15.00 per share by the Company
commencing twelve months following completion of the placement if
the common shares have been registered and the closing market
price of the Company's common stock exceeds $18.75 for 10
consecutive trading days.

     An individual who assisted the company in identifying
participants in the November 30, 2004 private placement elected
to receive a commission for the services in stock rather than
cash.  The commission amount was $326,400, and 27,200 common
shares were issued in payment of the obligation in February,
2005.  The 2004 Management Bonus Plan provided for the granting
of 10,000 shares of common stock valued at $12.00 per share.  The
cost of the grant was recognized in December 2004, and 10,000
shares were issued in May, 2005.

                          Page 58


NOTE 11 - STOCK-BASED COMPENSATION PLANS AND WARRANTS
-----------------------------------------------------

STOCK AND STOCK OPTIONS ISSUED TO DIRECTORS, OFFICER, CONSULTANTS
AND EMPLOYEES

     The Company issued options pursuant to its 1996 Stock Option
Plan (the "1996 Plan"), the 1998 Non-Qualified Stock Option Plan
(the "1998 Plan") and the Management Equity Incentive Plan.  The
Company also grants stock awards pursuant to its 2000 Stock Award
Plan (the "2000 Plan"), Management Equity Incentive Plan, and
2004 Management Bonus Plan, described below.  Collectively, the
1996 Plan, the 1998 Plan, and the 2000 Plan provided for the
granting of up to 160,000 shares.  All options under the 1996
Plan, the 1998 Plan and the 2000 Plan were granted at a price
approximating fair market value at the date of grant, had vesting
periods ranging from issuance date to five years, had maximum
terms ranging from five to seven years and were issued to
directors, officers, consultants and employees of the Company.
The Management Equity Incentive Plan provides for the granting of
1,094,712 shares of common stock and 377,339 options for the
purchase of one share of common stock.  The 2004 Management Bonus
Plan provides for the granting of 10,000 shares of common stock
valued at $12.00 per share.

     With one exception, all options issued under the 1996 Plan,
the 1998 Plan and the 2000 plan expired in 2005.  All the options
issued under these plans had strike prices significantly above
market prices.  In 2005, an agreement was reached with the sole
holder of unexpired options issued under these plans to cancel
those options.  The 1996 Plan, the 1998 Plan and the 2000 Plan
were then terminated.  As a result, all options outstanding at
December 31, 2005 were issued under the Management Equity
Incentive Plan.

     Compensation cost for stock options granted to employees is
measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock.

     The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, ("SFAS
123"), "Accounting for Stock-Based Compensation."  The fair value
of each option granted in 2005 was estimated on the date of grant
using the Black Scholes option pricing model based on weighted-
average assumptions of: risk-free interest rate of 4.22%,
expected volatility of 46.0%, expected life of ten years and an
expected dividend of zero.

     The following table summarizes stock option activity for the
periods noted.  All options listed below were issued to officers,
directors, employees and consultants.

                                                        WEIGHTED-
                                                         AVERAGE
                                         AMOUNT      EXERCISE PRICE
                                         ------      --------------

   Outstanding at December 31, 2002      61,710         $197.45
     Granted                                  -               -
     Expired or canceled                 (7,760)        $207.45
     Exercised                                -               -
                                       --------

                          Page 59

   Outstanding at December 31, 2003      53,950         $207.43
     Granted                                  -               -
     Expired or canceled                (39,270)        $198.54
     Exercised                                -               -
                                       --------

   Outstanding at December 31, 2004      14,680         $231.22
     Granted                            365,000         $ 12.71
     Expired or canceled                (14,680)        $231.22
     Exercised                                -               -
                                       --------

   Outstanding at December 31, 2005     365,000(a)      $ 12.71
                                       ========

   Options exercisable at
    December 31, 2005                   238,335         $ 12.50
                                       ========
Weighted-average years of remaining
 contractual life of options
 outstanding at December 31, 2005          9.39
                                       ========

     (a)  Exercise prices vary from $12.00 to $17.25, and expiration
          dates vary from May 2015 to October 2015.

     The weighted-average fair value of options granted during
2005 was $10.80.

STOCK PURCHASE WARRANTS ISSUED TO NON-EMPLOYEES

     The Company accounts for equity securities issued to non-
employees in accordance with the provisions of SFAS 123 and
Emerging Issues Task Force 96-18.  During 2002, in connection
with the loan amendments for the Cadiz obligations described in
Note 6, the Company repriced certain warrants previously issued
resulting in a reduction in the weighted-average exercise price.
At December 31, 2002, there were 113,600 warrants outstanding
with a weighted-average exercise price of $58.50 per share, which
expired through 2006.

     In connection with the Company's default in February 2003 on
its senior term loan and $25 million revolving credit facility,
as described in Note 6; (i) warrants held by the lender to
purchase 40,000 shares of the Company's common stock vested at an
exercise price of $0.25 per share; and (ii) the exercise price on
warrants held by the lender to purchase 57,000 shares of the
Company's common stock was automatically reset to $0.25 per
share.

     In December 2003, warrants to purchase 94,000 shares of
common stock were exercised for $23,500 in total cash proceeds.
The remaining warrants to purchase 8,600 shares of common stock
of the Company at a weighted average exercise price of $190.00
per share expired in 2004.

     On November 30, 2004 the Company completed a private
placement of 400,000 units, each Unit consisting of five (5)
shares of the Company's common stock and one (1) common stock
purchase warrant.  Each of the 400,000 warrants entitle the
holder to purchase one (1)

                          Page 60

share of common stock at an exercise price of $15.00 per share.
Each Warrant has a term of three (3) years, and is callable by
the Company commencing twelve months following completion of the
placement if the closing market price of the Company's common
stock exceeds $18.75 for 10 consecutive trading days.  All 400,000
warrants remain outstanding.

2000 STOCK AWARD PLAN

     The Cadiz Inc. 2000 Stock Award Plan ("Stock Award Plan")
was approved by the Company's shareholders in May 2000.  Under
the Stock Award Plan, the Company may issue various forms of
stock awards including restricted stock and deferred stock units
to attract, retain and motivate key employees or other eligible
persons.  Each of the units entitled the holder to receive one
share of the Company's common stock for each deferred stock unit
three years from the date of grant.  During the year ended
December 31, 2004, 1,289 stock units were exchanged for shares of
the Company's common stock and the remaining deferred stock units
were cancelled in exchange for a payment to the holders of
approximately $9,000.  The Stock Award Plan was then terminated.
The Company charged $152,000 to expense during the year ended
December 31, 2003 in connection with the Stock Award Plan.

MANAGEMENT EQUITY INCENTIVE PLAN

     In December 2003, concurrently with the completion of the
Company's then current financing arrangements with ING, the
Company's board of directors authorized the adoption of a
Management Equity Incentive Plan (the "Incentive Plan").  Under
the Incentive Plan, a total of 1,472,051 shares of common stock
and common stock options may be granted to key personnel. The
Board formed allocation committees to direct the initial
allocation of 717,373 of these shares and a subsequent allocation
of 377,339 shares of common stock and 377,339 options to purchase
common stock.

     In May 2005, 717,373 initial allocation shares, 377,339
subsequent allocation shares and 325,000 options were awarded.
An additional 40,000 options were awarded in October, 2005.

     All grants are subject to vesting conditions.  The initial
allocation shares vested 2/3 immediately on the date of the grant
and the remaining 1/3 vested on December 11, 2005.  The
subsequent allocation shares of common stock and options to
purchase common stock vest 1/3 upon grant, 1/3 on December 7,
2005 and 1/3 on December 7, 2006, or such later vesting dates as
may be determined by the subsequent allocation committee.  All
grants are subject to continued employment and immediate vesting
upon termination without cause.

2004 MANAGEMENT BONUS PLAN

     In December 2004, the Company, with board approval, adopted
the Cadiz Inc. 2004 Management Bonus Plan (the "Bonus Plan")
pursuant to which a total of 10,000 shares of Cadiz common stock,
valued at $12 per share, were authorized for issuance to Mr.
Brackpool as a performance bonus.  See Item 11 "Executive
Compensation".  The liability and compensation expense related to
this award was reflected in the 2004 financial statements, and
the shares were issued under the Bonus Plan in May 2005.

                          Page 61

NOTE 12 - SEGMENT INFORMATION
-----------------------------

     With Sun World's filing of voluntary petitions for relief
under Chapter 11 of the Bankruptcy code as further described in
Note 1, the primary business of the Company is to acquire and
develop land and water resources.  Prior to the filing of
voluntary petitions the Company had two reportable segments:
water resources (Cadiz) and agriculture (Sun World).  After the
bankruptcy, the Company's financial results are reported in a
single segment.  The accounting policies of the segments are the
same as those described in the summary of significant accounting
polices.  The Company's operations are reported in the following
business segments:

     Financial information by reportable business segment is
reported in the following tables:

                                           2004     2003     2002
                                           ----     ----      ----
                                               ($ in thousands)

External sales:
 Water Resources                         $  1,197  $     47  $    157
 Agricultural                                   -         -     3,005
                                         --------  --------  --------

Consolidated                             $  1,197  $     47  $  3,162
                                         ========  ========  ========
Inter-segment sales:
 Water Resources                         $      -  $      -  $    146
 Agricultural                                   -         -      (146)
                                         --------  --------  --------

Consolidated                             $      -  $      -  $      -
                                         ========  ========  ========

Total sales:
 Water Resources                         $  1,197  $     47  $    303
 Agricultural                                   -         -     3,005
 Other                                          -         -      (146)
                                         --------  --------  --------

Consolidated                             $  1,197  $     47  $  3,162
                                         ========  ========  ========

Profit (loss) before income taxes:
 Water Resources                         $(20,758) $ (3,530) $ (5,236)
 Agricultural                                   -         -    (1,200)
 Other                                          -    (3,443)     (195)
 Interest expense                          (1,931)   (9,064)   (4,905)
                                         --------  --------  --------

Consolidated                             $(22,689) $(16,037) $(11,536)
                                         ========  ========  ========

Capital expenditures:
 Water Resources                         $     68  $      8  $     34
 Agricultural                                   -         -       337
                                         --------  --------  --------

Consolidated                             $     68  $      8  $    371
                                         ========  ========  ========


Depreciation and amortization:
 Water Resources                         $    229  $    527  $    553
 Agricultural                                   -         -       190
                                         --------  --------  --------

Consolidated                             $    229  $    527  $    743
                                         ========  ========  ========


Interest expense, net:
 Water Resources                         $  1,931  $  9,064  $  3,636
 Agricultural                                   -         -     1,269
 Other                                          -         -         -
                                         --------  --------  --------

Consolidated                             $  1,931  $  9,064  $  4,905
                                         ========  ========  ========

                          Page 62

Assets:
 Water Resources                         $ 46,046  $ 51,071  $ 49,526
 Agricultural                                   -         -         -
 Other                                          -         -         -
                                         --------  --------  --------

Consolidated                             $ 46,046  $ 51,071  $ 49,526
                                         ========  ========  ========


NOTE 13 - CONTINGENCIES
-----------------------

     In the normal course of its agricultural operations, the
Company handles, stores, transports and dispenses products
identified as hazardous materials.  Regulatory agencies
periodically conduct inspections and, currently, there are no
pending claims with respect to hazardous materials.

     The Company is involved in other legal and administrative
proceedings and claims.  In the opinion of management, the
ultimate outcome of each proceeding or all such proceedings
combined will not have a material adverse impact on the Company's
financial statements.


NOTE 14 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
----------------------------------------------------

(In thousands except per share data)

                                       QUARTER ENDED
                     ------------------------------------------------
                     MARCH 31,  JUNE 30,  SEPTEMBER 30,  DECEMBER 31,
                        2005     2005         2005          2005
                        ----     ----         ----          ----

Revenues               $    15  $     15    $     15     $  1,152
Operating loss          (1,006)  (12,178)     (3,411)      (4,163)
Net loss applicable
 to common stock        (1,569)  (12,625)     (3,863)      (4,968)
Net loss per
 common share          $ (0.15) $  (1.18)   $  (0.35)    $  (0.46)


                                       QUARTER ENDED
                     ------------------------------------------------
                     MARCH 31,  JUNE 30,  SEPTEMBER 30,  DECEMBER 31,
                        2004     2004         2004          2004
                        ----     ----         ----          ----

Revenues               $    11  $      9    $     12     $     15
Operating loss            (658)     (601)       (756)      (4,958)
Net loss applicable
 to common stock        (2,815)   (2,724)     (2,894)      (7,604)
Net loss per
 common share          $ (0.43) $  (0.41)   $  (0.44)    $  (1.04)

                          Page 63


SCHEDULE 1 - VALUATION AND QUALIFYING ACCOUNTS
--------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 ($ IN THOUSANDS)

                    BALANCE AT     ADDITIONS CHARGED TO                 BALANCE
YEAR ENDED          BEGINNING     COSTS AND       OTHER                  AT END
DECEMBER 31, 2005   OF PERIOD     EXPENSES       ACCOUNTS  DEDUCTIONS  OF PERIOD
-----------------   ----------    ---------      --------  ----------  ---------

 Tax valuation
  allowance        $   44,383     $    -       $       -   $   12,769  $  31,614
                   ==========     ======       =========   ==========  =========
YEAR ENDED
DECEMBER 31, 2004
-----------------

 Tax valuation
  allowance        $   43,760     $    -       $     623   $        -  $  44,383
                   ==========     ======       =========   ==========  =========

YEAR ENDED
DECEMBER 31, 2003
-----------------

 Allowance for
  doubtful
  accounts         $      547     $  547       $       -   $        -  $       -
                   ==========     ======       =========   ==========  =========

 Tax valuation
  allowance        $   65,018     $    -       $ (21,258)  $        -  $  43,760
                   ==========     ======       =========   ==========  =========

                          Page 64


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereto duly authorized.

                              CADIZ INC.

                              By:  /s/ Keith Brackpool
                                   ----------------------------------
                                   Keith Brackpool,
                                   Chairman and Chief Executive Officer

                              Date:  March 16, 2006
                                     -----------------

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in the
capacities and on the dates indicated.

NAME AND POSITION                                 DATE
-----------------                                 ----


/s/ Keith Brackpool                           March 16, 2006
---------------------------------             -----------------
Keith Brackpool,
Chairman and Chief Executive Officer
(Principal Executive Officer)


/s/ O'Donnell Iselin II                       March 16, 2006
---------------------------------             -----------------
O'Donnell Iselin II,
Chief Financial Officer (Principal
Financial and Accounting Officer)


/s/ Murray H. Hutchison                       March 16, 2006
---------------------------------             -----------------
Murray H. Hutchison, Director


/s/ Timothy J. Shaheen                        March 16, 2006
---------------------------------             -----------------
Timothy J. Shaheen, Director


/s/ Raymond J. Pacini                         March 16, 2006
---------------------------------             -----------------
Raymond J. Pacini, Director


/s/ Gregory W. Preston                        March 16, 2006
---------------------------------             -----------------
Gregory W. Preston, Director

                          Page 65